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TAXATION 


ITS    PRINCIPLES    AND    METHODS 


TRANSLATED   FROM   THE 


"SCIENZA    DELLE    FINANZE" 


Dr.  LUIGI   COSSA 


PROFESSOR    IN   THE   UNIVERSITV    OF   PAVIA,  ITALY 


WITH    AN    INTRODUCTION   AND    NOTES 


HORACE    WHITE 


TOGETHER  WITH  A  COMPILATION   OF  THE  STATE  TAX  SYSTEMS 
OF   NEW   YORK   AND   PENNSYLVANIA 


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NEW  YORK  &  LONDON 

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1896 

Copyright,  1888, 
By    HORACE    WHITE. 


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INTRODUCTION. 


The  author  of  this  treatise  kindly  sent  me  a  copy 
of  it  in  the  year  1882,      I  had  become  interested 
in  his  work,  through  his  "  Guide  to  the  Study  of 
Pohtical  Economy,"  introduced  to  EngHsh  readers 
by  the  late  Professor  Jevons.     I,  accordingly,  had 
a  translation  of  the  Sciciiza  delle  Fiiianze  made  for 
my   own   use,  but  without    any  fixed   intention  of 
publishing  it.     The  admirable  brevity  and  compre- 
hensiveness of  Professor  Cossa's  statement  of  the 
principles  of  taxation,  and  the  light  thrown  on  the 
evolution  of  the  science  of  public  finance,  and  the 
want  of  any  short  treatise  of  similar  scope  in  the 
v)  English  language,  led  me  to  believe  that  it  would 
^  find  an  appreciative  audience  in  this  country.      But 
"^ithe  time  did  not  then  appear  to  be  favorable. 

During  the  past  three  or  four  years  there  has 
been  a  marked  revival  of  interest  in  economic  dis- 
cussion, as  is  shown  by  the  number  of  new  works 
by  American  writers  that  have  come  from  the 
press  in  that  interval,  and  by  the  formation  and 
regular  meetings  of  two  distinctively  economic  so- 
cieties. Notwithstanding  the  shaking  up  that  Po- 
litical Economy  has  received  in  recent  years,  which 


iX^^iafi  '7Q 


IV  INTRODUCTION, 

some  people  think  has  reduced  the  whole  science 
to  chaos,  it  is  certain  that  it  never  had  so  many 
active,  intelligent  and  persevering  votaries  in  this 
country  as  now.  Even  those  who  consider  the 
science  a  chaos  always  talk  and  write  as  though 
there  were  a  considerable  and  pretty  firm  founda- 
tion to  build  on. 

It  is  evident,  too,  that  the  public  are  taking  a 
more  general  interest  than  formerly  in  the  sub- 
ject of  taxation  in  all  its  bearings.  Hardly  a  year 
passes  that  some  State  Tax  Commission  is  not 
working  on  the  problems  of  local  revenue,  while 
the  question  of  national  revenue,  or  perhaps  we 
might  better  say  national  non-revenue,  is  the  ab- 
sorbing one  in  Washington  City. 

This  work  does  not  deal  with  customs  duties 
except  in  their  fiscal  aspect.  The  dispute  be- 
tween protection  and  free  trade  is  not  touched 
upon,  since  the  aim  of  protection  is  not  to  pro- 
vide means  for  the  support  of  government,  but 
something  quite  different.  The  science  of  the 
finances  does  not  deal  with  thingrs  which  incident- 
ally  affect  the  revenue.  A  dry  season  may  do 
that,  but  dryness  and  wetness  are  not  financial 
considerations.  While  the  tariff  question,  as  it 
popularly  presents  itself,  is  not  touched  upon,  the 
effects  of  taxes  on  imports,  upon  different  classes 
in  the  community,  are  made  sufficiently  clear. 

A  few  notes    have    been    added  to  the  text  in 


IN  TROD  UC  TION.  V 

order  to  give  local  application  and  local  interest 
to  the  abstract  principles  stated.  For  the  same 
reason  there  has  been  added  an  appendix,  giving 
in  as  brief  form  as  possible  the  State  tax  systems 
of  New  York  and  Pennsylvania  as  they  stand  to- 
day. A  compilation  of  the  tax  systems  of  all  the 
other  States  would  be  interesting  and  valuable, 
but  I  would  not  advise  anybody  to  undertake  the 
task  unless  he  has  a  great  deal  of  unemployed 
time  to  dispose  of. 

A  two-fold  evolution  is  now  going  on  in  State 
taxation.  There  is  a  movement  in  the  first  place 
to  drop  real  estate  from  the  list  of  State  taxables, 
and  to  remit  it  wholly  to  the  lesser  political  sub- 
divisions, the  cities,  towns  and  counties.  There 
is  also  a  movement  to  discontinue  the  attempt  to 
tax  floating  capital,  money  at  interest  and  the  like, 
and  to  look  only  to  those  things  which  can  always 
be  found  and  which  cannot  get  away,  for  the 
revenue  of  the  State  proper.  Pennsylvania  led 
the  way  in  releasing  real  estate  from  State  tax- 
ation. That  State  also  led  the  way  in  adopting 
scientific  rules  for  the  taxation  of  corporations, 
although  the  system  is  still  far  from  perfect. 
Further  information  will  be  found  in  the  note 
on  Taxation  of  Corporations. 

Although  the  current  has  always  run  strongly 
in  this  country  in  favor  of  the  taxation  of  movable 
personal  property,  and  even  yet  affords  a  favorite 


VI  INTRODUCTION. 

theme  for  windy  declamation,  I  am  convinced  that 
that  particular  tax  will  slowly  but  surely  disap- 
pear. The  State  of  New  York  scarcely  pretends 
to  collect  the  personal  property  tax,  although 
her  laws  require  its  collection.  Other  States 
that  pretend  to  collect  it  meet  with  little  better 
success,  although  they  do  cause  a  great  deal  of 
false  swearing  and  hard  feeling.  The  latest 
official  report  on  this  subject  that  can  be  called 
comprehensive  is  that  submitted  by  Dr.  R.  T. 
Ely,  of  the  Maryland  Tax  Commission.  What 
he  finds  and  what  he  says  about  the  taxation  of 
personal  property  coincides  with  the  views  of 
nearly  all  the  accredited  teachers  of  fiscal  science 
in  this  country.  It  is  true  that  Dr.  Ely's  col- 
leagues on  the  Maryland  Tax  Commission  do  not 
agree  with  him  on  this  point.  In  the  first  place, 
the  Constitution  of  the  State  of  Maryland  re- 
quires that  all  property  shall  be  taxed  equally. 
But  if  it  were  otherwise,  the  majority  of  the  Com- 
mission would  still  be  in  favor  of  taxing  movable 
personal  property.  But  they  are  in  favor  of  ex- 
empting mortgages  from  taxation,  although  this 
is  almost  the  only  form  of  floating  capital  that 
can  always  be  identified  and  located  without  any 
chance  of  error. 

The  report  of  this  Commission  came  to  hand 
after  the  body  of  this  work  had  gone  to  press. 
There  was  accordingly  very  little  opportunity  to 


INTRODUCTION.  VU 

avail  of  its  certainly  valuable  investigations.  One 
novel  recommendation  of  the  majority  is  that 
Maryland  shareholders  of  foreign  corporations  be 
taxed  or  not  taxed  on  their  shares  according  as 
the  State  where  the  corporation  is  domiciled  does 
or  does  not  tax  her  own  citizens  holdincj  shares  of 
Maryland  corporations. 

This  translation  of  Professor  Cossa's  Scienza 
delle  Finalize  was  made  originally  by  Mr.  A.  H. 
Gumlogsen,  who  is  now,  I  believe,  a  resident  of 
Chicago.  The  translator's  want  of  acquaintance 
with  the  terms  in  use  in  Political  Economy  made 
extensive  revision  necessary.  This  was  kindly  un- 
dertaken by  my  friend,  Mr.  S.  Dana  Horton,  to 
whom  my  thanks  are  due  in  an  especial  manner. 
While  the  work  was  going  through  the  press,  I 
learned  that  Mr.  Eugene  Schuyler  and  his  nephew, 
Mr.  Louis  Bedell  Grant — the  latter,  United  States 
Consular  clerk  at  St.  Gall,  Switzerland — were 
translating  the  same  work  into  English  for  publica- 
tion. I  at  once  offered  to  surrender  the  honors  to 
Mr.  Schuyler  together  with  the  work  already  done, 
but  he  declined  the  offer  and  kindly  undertook  to 
revise  the  proofs  by  the  help  of  his  own  transla- 
tion, and  the  same  were  accordingly  forwarded  to 
him  for  that  purpose.  In  the  fourth  edition  of 
Professor  Cossa's  work  it  is  stated  that  it  had 
already  been  translated  into  the  German,  Swedish, 
Polish,  Russian  and  Spanish  languages. 


VIU  INTRODUCTION. 

A  few  additions  have  been  made  to  Professor 
Cossa's  Bibliography  of  the  science.  I  am  aware 
that  further  additions  might  be  made,  especially  of 
works  in  the  English  language. 

Thanks  are  due  to  the  Hon.  Alfred  C.  Chapin, 
ex-Comptroller  of  New  York,  and  to  Mr.  Frank 
M.  Eastman,  law  clerk  in  the  office  of  the  Aud- 
itor-General of  Pennsylvania,  for  quite  invaluable 
assistance  in  compiling  the  tax  systems  of  their 
respective  States.  H.  W. 

New  York,  February,  1888. 


TABLE    OF   CONTENTS. 


Introduction iii 

PART    I. 

PRELIMINARY   CONCEPTS. 

Chapter  I.   Idea,  Limits  and  Character  of  the  Science  of  the  Finances  i 

II.  Sources,   Divisions  and  Importance  of   the  Science  of 

the  Finances 3 

III.   historical  Data  of  the  Science  of  the  Finances 5 

PART    II. 

PUBLIC   EXPENDITURES. 

Chapter  I.   The  Idea  of  Public  Expenditures il 

II.   Public    Expenditure    in    its    Juridical,    Political    and 

Economical  Aspects 13 

III.  Classification  of  Public  Expenditures   17 


PART   III. 

PUBLICINCOME. 

Section        '  t.   Original  Public  Income 24 

Chapter  I.   The  Idea  and  Division  of  the  Fiscal  Domain 24 

II.  Administration  of  the  Fiscal  Domain 27 

III.  Sale  of  the  Fiscal  Domain 30 

Section         II.  Deiivalive  Public  Income 35 

Chapter  I.   Idea,  Reason  and  Form  of  Fees,  Costs  and  Charges.  . .  36 

II.  Charges  arising  in  Matters  of  Judicial  Cognizance  ...  39 

§  I.  Court  Costs 39 

§  2.  Fees  for  Certification  and  Registration 41 

§  3.  Collection   of    Charges   arising    from    Matters   of 

Judicial  Cognizance 4a 


X  TABLE   OF  CONTENTS. 

PAGE 

Chapter      III.  Charges  on  the  Means  of  Exchange  and  Transport 45 

§  I.  On  Coinage 45 

§  2.  On  Weights  and  Measures  and  on  Marking 47 

§  3.  On  Railways,  Posts  and  Telegraphs 48 

Mv.   Idea,  Reason  and  Rules  of  General  Taxation 5° 

§  I.  Juridical  Rules 5i 

§  2.  Economic  Rules 58 

§  3.   Political  Rules 60 

V.   Repercussion  of  Taxes ....  62 

"  VI.  Classification  of  Taxes 64 

VII.  Objective  Imposts  on  the  Produce  of  Real  Property. . .  69 

§  I.   Imposts  on  the  Produce  of  Land 69 

§  2.   Imposts  on  the  Rent  of  Buildings 75 

^VIII.  Personal    Imposts    on    Income    derived   from  Movable 

Property 7° 

g  I.   Imposts  on  Income  derived  from  Capital 79 

§  2.  Imposts  on  Personal  Income 85 

§  3.   Imposts  on  Industrial  Income 88 

IX.   Indirect  Imposts  on  Transfers  of  Ownership 92 

§  I.   Imposts  on  Transfers  made  upon  Valuable  Con- 
sideration    93 

§  2.  Imposts  on  Gratuitous  Transfers 95 

§  3.  Imposts  in  lieu  of  Transfer  Tax 98 

X.  Indirect  Taxes  on  Consumption 99 

§  I.  Classification  of  Imposts  on  Consumption 100 

§  2.  Fiscal  Monopolies 103 

§  3.   Imposts  on  Manufacture  and  Sale 106 

§  4.  Internal  Customs  Duties  (Octroi) 108 

§  5.  Customs  Duties I09 

§  6.  Imposts  of  Immediate  Collection 113 

XL  Direct  Imposts  on  Income  and  on  Property  in  General.  116 

§  I.  General  Tax  on  Incomes 116 

§  2.   General  Imposts  on  the  Entire  Estate  of  the  Tax- 
payer  ^22 

-J  XII.  Comparison  of  Direct  with  Indirect  Taxes 125 

XIII.  Comparison  between  the  Multiple  Tax  System  and  the 

Single  Tax  System 128 

■v'XIV.   Local  Taxes   ^33 

Note  on  Taxation  of  Mortgages 136 

Note  on  Taxation  of  Personal  Property I39 


TABLE    OF   CONTENTS.  XI 

PAGE 

Note  on  Taxation  of  Corporations i^3 

Note  on  Taxation  of  "  Land  Values" i47 

Note  on  Taxes  on  Consumption 1 50 

PART   IV. 

THE   RELATION    BETWEEN    I'UIJI.IC    RECEIPTS    AND    EXPENDITURES. 

Chapter          I.   General  Ideas I53 

UI.  The  Public  Debt 156 

^  ril.   Floating  Debt 1^0 

§  I.    Classiikation  of  the  Floating  Debt 160 

§  2.    Paper  Money 164 

IV.  Consolidated  Debt 166 

^  I.   Redeemable  Debt 166 

§  2.   Irredeemable  Debt 1 7° 

V.  Administration  of  the  Public  Debt 173 

§1.   Negotiation i73 

§2.   Extinction 17^ 

§3.   Conversion i?^ 

Bibliography  of  the  Science  of  the  Finances 181 


APPENDIX. 

Existing  Tax  Systems  of  New  York  and  Pennsylvania 195 

New  York  State 196 

New  York  City 201 

Pennsylvania 202 

The  Pennsylvania  Tax  Commission  Bill 211 


PART  I. 
Taxation — Its  Principles  and  Methods. 


CHAPTER  I. 

IDEA,    LIMITS     AND     CHARACTER    OF    THE    SCIENCE    OF 

THE    FINANCES. 

Men  unite  together  and  constitute  domestic,  civil 
and  political  society  for  the  purpose  of  preserving 
and  perfecting  their  physical,  intellectual  and  moral 
faculties,  as  well  as  of  attaining  the  highest  ends  of 
existence. 

The  principal  forms  of  political  society  are  the 
municipality,  the  province  and  the  state,  each  of 
which  possesses  a  judicial  constitution  and  arrange- 
ment of  its  own,  and  which  are  severally  governed 
by  authorities  which  represent,  defend  and  promote 
their  interests  and  provide  for  the  public  needs. 

In  order  to  be  able  to  fulfill  such  duties  the  sev- 
eral bodies  politic  have  need  of  a  sufficient  amount 
of  exchangeable  material  property  (wealth)  ;  they 
must  therefore  create  a  special  property  or  estate 
{patrzmonio),w\\\<z\\  is  called  the  public  estate,  from 
the   public    character  of    the  bodies    that    dispose 

of  it. 

I 


2  TAX  A  TION—ITS  PRINCIPLES  AND  METHODS. 

-  By  public  estate  is  understood  that  portion  of 
the  national  resources  which  is  set  apart  by  law  to 
provide  for  the  wants  of  the  government  and  of 
lesser  political  societies  (the  province,  the  munici- 
pality). The  public  estate,  which  comprises  the 
fiscal  domain  and  the  proceeds  of  taxation,  both 
general  and  local,  must  not  be  confounded  with 
the  property  of  private  individuals,  or,  in  the  case 
of  a  monarchy,  with  that  of  the  sovereign. 

The  Science  of  the  Finances  is  the  body  of  prin- 
ciples which  relate  to  the  public  estate  {^patrimonio). 
It  teaches  the  best  method  of  establishing,  manag- 
ing and  using  it. 

The  object  of  the  Science  of  the  Finances  is 
common  with  that  of  other  financial  studies,  which 
also  deal  with  the  public  estate,  but  regard  it  from 
a  different  point  of  view. 

Such  are  the  history  of  the  finances,  financial 
statistics  and  positive  financial  law,  which  investi- 
gate the  public  estate,  either  through  its  trans- 
formations in  the  progress  of  time,  or  in  its  actual 
conditions  in  given  times  and  places,  or  in  the  legal 
relations  that  belong  to  it. 

These  studies,  which  are  indispensable  for  gain- 
ing a  deeper  knowledge  of  the  Science  of  the 
Finances,  consider  the  public  estate  in  its  concrete 
manifestations,  but  always  conditioned  within  time 
and  space  ;  while,  on  the  other  hand,  the  Science  of 
the  Finances  deals  with  that  which  is  universal  and 


TAXATION— ITS  PRINCIPLES  AND  METHODS.  3 

permanent,  and  in  this  sense  it  belongs  as  much  to 
the  past  as  to  the  present  and  to  the  future. 

Although  the  Science  of  Finances  investigates 
the  causes  and  effects  of  financial  facts  (for  example: 
the  effects  of  taxes  and  loans),  its  chief  office  never- 
theless is  to  furnish  the  guiding  principles  for  the 
proper  management  of  the  revenue  of  the  state,  of 
the  province,  or  of  the  municipality. 

The  Science  of  the  Finances  forms  a  part  of  the 
science  of  public  administration,  which  in  its  turn 
is  a  branch  of  political  science  in  its  wider  meaning 
of  the  science  of  government. 

At  the  present  day,  however,  the  Science  of  the 
Finances  is  generally  studied  as  a  matter  altogether 
distinct  from  the  other  branches  of  administrative 
science  by  reason  of  the  importance  of  its  objects, 
the  variety  of  its  sources,  and  the  extended  scope 
of  the  doctrines  which  it  embraces. 


CHAPTER  II. 

SOURCES,     DIVISION      AND     IMPORTANCE     OF     THE    SCI- 
ENCE   OF    THE     FINANCES CLASSIFICATION. 

The  Science  of  the  Finances  does  not,  as  many 
are  still  inclined  to  believe,  constitute  a  mere  ap- 
pendix to  political  economy.  It  is  by  no  means 
restricted  to  the  investigation  of  the  economic  con* 
sequences  of  fiscal  provisions. 


4  TAXATION— ITS  PRINCIPLES  AND   METHODS. 

The  general  principles  of  law  and  political  sci- 
ence are  sources  of  the  Science  of  the  Finances  as 
well  as  those  of  political  economy.  All  financial 
questions  should  therefore  be  considered  in  the 
triple  aspect  of  justice,  convenience  and  social  ad- 
vantage. The  knowledge  of  these  three  branches 
of  study  is  accordingly  an  essential  requisite  to  a 
clear  understanding  of  the  elements  of  the  Science 
of  the  Finances. 

There  are  other  branches  of  learning  auxiliary  to 
the  Science  of  the  Finances,  such  as  political  arith- 
metic, government  systems  of  account,  technology, 
private  economy  (domestic  and  industrial),  and 
notably  the  history,  legislation  and  comparative 
statistics  of  finance,  all  of  which  contribute  to  the 
science  valuable  materials  for  the  elaboration  of  its 
theories. 

The  Science  of  the  Finances  divides  itself  natu- 
rally into  three  parts,  which  treat  of  expenditure, 
of  income,  and  of  their  rda_tions,  to  each  other. 

It  forms  a  subject  worthy  of  careful  special  study, 
by  reason  of  the  theoretical  importance  of  its  object 
as  a  part  of  general  education,  especially  politico- 
legal  education,  as  well  as  by  reason  of  the  prac- 
tical utility  of  its  teachings.  In  particular  is  it 
useful  to  those  who,  either  directly  (as  magistrates, 
or  as  members  of  deliberative  or  of  consultative 
bodies),  or  indirectly  through  the  rights  of  assem- 
bly, and  of  petition,  or  through  the  press,  exercise 


TAXATION— ITS  PRINCIPLES  AND  METHODS,  5 

an  influence  on  the  government  of  the  State,  or  of 
poHtical  societies  of  inferior  extent. 

A  necessary  complement  to  the  Science  and  the 
Art  of  the  Finances  is  practice,  which  consists  in 
effective  action,  and  avails  itself  of  the  truths  of 
science  and  of  the  principles  of  art,  strengthening 
both  with  the  results  of  individual  experience. 

Science,  art  and  practice  are  the  complements  of 
each  other,  and  it  is  a  mistake  to  assume  that  one 
can  take  the  place  of  the  other.  Science  explains  ; 
art  guides  and  counsels  ;  practice  acts  and  executes. 

Neglect  of  any  of  these  elements  necessary  for 
the  profitable  realization  of  financial  thought  leads 
to  empiricism  and  the  day-dreams  of  Utopia. 


CHAPTER  III. 

HISTORICAL  DATA  OF  THE  SCIENCE  OF  THE    FINANCES. 

The  financial  systems  of  Greece  and  Rome  in 
ancient  times,  and  those  no  less  notable  of  Florence 
and  of  Venice  during  the  middle  ages,  must  be 
considered  as  luminous  proofs  of  practical  sagacity, 
and  not  as  the  product  of  scientific  research,  which 
in  these  epochs  has  yielded  but  a  few  fragments 
from  classical  writers  (Xenophon  and  Aristotle), 
and  certain  maxims  of  financial  morals  buried  in 
the  theological,  philosophical,  political  and  legal 
works  of  the  schoolmen. 

Since  the  Renaissance  various  principles  of  finan- 


6  TAXATION— ITS  PRINCIPLES  AND  METHODS. 

cial  policy  show  themselves,  developed  with  some 
fullness  in  the  writings  of  publicists  here  and  there 
in  the  fifteenth  (Carafa),  and  so  likewise  in  the 
sixteenth  century,  the  Frenchman  Bodin  ranking 
foremost  among  the  latter,  while  among  the  Ital- 
ians Palmieri,  Guicciardini,  and  particularly  Botero, 
distinguished  themselves. 

These  principles  were  commented  upon  with 
more  or  less  prolixity,  but  with  little  originality,  in 
many  works  which  saw  the  light  in  the  seventeenth 
century,  the  work  being  undertaken  in  some  cases 
from  pure  motives  of  erudition  (Bornitz,  Besold, 
Klock),  in  others  with  a  view  to  administrative 
interests  (Seckendorf  and  the  German  and  English 
writers  on  excise).  After  a  few  decades,  however, 
there  appeared  a  number  of  authors  who  with 
greater  boldness  advocated  general  or  partial  re- 
forms of  the  system  of  taxation  in  the  interest  of 
the  public  treasury  (in  Spain  and  Germany),  or  in 
that  of  the  taxpayers  in  the  endeavor  to  bring 
about  a  more  equitable  distribution  of  burdens 
(Boulainvilliers,  Vaubanand  Boisguillebert ;  Pascoli 
and  Bandini). 

Of  more  distinct  merit,  from  the  scientific  point 
of  view,  were  certain  English  writers  of  the  seven- 
teenth century,  among  whom  Hobbes,  Petty,  and 
especially  Locke,  were  the  first  to  discuss,  although 
somewhat  superficially,  the  difficult  question  of  the 
incidence  and  the  repercussion  of  taxes. 


TAXATION— ITS  PRINCIPLES  AND   METHODS.  7 

As  a  worthy  parallel  to  these,  other  writers,  also 
English  (Davenant,  Hutcheson,  Barnard,  etc.),  ap- 
peared, who,  in  the  early  years  of  the  eighteenth 
century,  examined  in  its  technical  details  the  novel 
theory  of  the  public  credit,  which,  after  the  famous 
experiment  of  Law,  was  further  investigated  by 
Melon,  by  Dutot,  and  by  other  apologists  or  ad- 
versaries of  that  system. 

A  much  wider  horizon  was  opened  to  financial 
thought  toward  the  middle  of  the  last  century. 
The  little-known,  yet  methodical  and  important, 
treatise  on  taxation  by  the  Neapolitan,  Broggia 
(1743),  was  followed  by  Montesquieu's  work  on 
The  Spirit  of  Lazvs  (1748),  which,  with  great 
penetration,  explains  the  connection  between  po- 
litical and  financial  institutions  ;  and  later  came  the 
much-prized  political  essays  of  Hume  (i  752),  which, 
as  it  were,  smoothed  the  path  for  the  famous  French 
school  of  physiocrats  (Quesnay,  the  elder  Mira- 
beau,  Turgot,  etc. ),  which,  with  a  rigorous  logic, 
derives  the  fiscal  corollary  of  the  single  tax  on  the 
revenue  of  landed  property  {impot  unique)  from 
the  certainly  ingenious  yet  fallacious  theory  of  "  net 
product  "  ( 1 758  and  following  years). '^ 

*  It  was  a  doctrine  of  the  physiocratic  school  that  since  land  alone  yielded 
a  "  net  product,"  /.  c,  a  surplus  over  the  value  of  the  labor  spent  upon  it, 
therefore  agriculture  was  tlie  only  productive  industry  and  ought  to  bear  the 
entire  burden  of  taxation.  To  sustain  this  thesis  it  is  necessary  to  assume 
that  the  agriculturist  (meaning  thereby  the  man  who  tills  his  own  land) 
is  outside  of  and  superior  to  the  law  of  competition,  for  if  he  is  subject  to 


8  TAXATION— ITS  PRINCIPLES  AND  METHODS. 

Almost  contemporaneously  with  this  systematic 
derivation  of  financial  from  economic  theories  in 
France,  Italy  and  England  an  attempt  is  made  at 
a  simple,  empirical  co-ordination  of  several  fiscal 
doctrines  (F.orbonnais,  Genovesi,  and  especially 
Steuart),  which  reaches  its  climax  in  the  works  of 
the  so-called  Kammeralists  of  Germany,  particu- 
larly in  those  of  Justi  and  Sonnenfels, 

The  theories  of  finance  finally  obtain  a  much 
broader  basis,  a  safer  and  more  correct  develop- 
ment, through  the  progress  of  political  economy, 
w^hich  is  raised  by  Adam  Smith  to  the  dignity  of  a 
true  science  by  his  memorable  investigations  into 
the  Wealth  of  Nations  (1776). 

The  financial  principles  of  Adam  Smith,  as  com- 
mented upon  and  discussed  in  the  books  of  political 
economy  (for  example,  in  those  of  Say,  Ricardo, 
Sismondi,  Lotz,  Rossi,  Mill,  Cherbuliez,  Sidgwick 
Vissering,  Walker,  Pierson,  Nazzani),  were  further 
illustrated  by  special  treatises  on  financial  science, 
for  example,  in  those  of  McCulloch,  Matlekovitz, 
Kautz,  Bilinski,  De  Luca,  Marescotti,  recently  sur- 


that  law  there  is  no  more  reason  why  he  should  pay  all  the  taxes  than  why 
carpenters  should  do  so.  Whatever  the  condition  of  the  world  may  come 
to  be  in  the  remote  future,  when  all  tillable  land  shall  have  been  brought 
under  cultivation,  it  is  not  now  true  that  agriculture,  upon  the  whole, 
possesses  any  advantages  over  other  callings.  And  this  is  made  mani- 
fest by  the  patent  fact  that  there  is  no  special  eagerness  to  take  up  agri- 
culture as  a  means  of  livelihood  in  the  United  States,  even  where  land  is 
offered  gratis. — Ed. 


I 


TAXATION— ITS  PRINCIPLES  AND  METHODS.  9 

passed  by  Leroy-Beaulieu.  Among  these,  the  fore- 
most place  for  critical  penetration,  breadth  of 
erudition,  and  systematic  arrangement  is  awarded 
to  the  German  manuals  of  Jakob,  of  Malchus,  Rau, 
Hock,  Stein  and  Roscher,  who  (the  four  last  men- 
tioned particularly)  are  distinguished  by  a  more 
complete  and  correct  determination  of  the  functions 
of  the  state,  which,  both  by  the  disciples  of  Smith 
and  the  publicists  who  followed  Kant,  had  erro- 
neously been  restricted  to  the  function  of  merely 
juridical  defence  of  person  and  property. 

The  Science  of  the  Finances  has  likewise  profited 
considerably  by  a  goodly  number  of  excellent  mono- 
graphs published  in  the  present  century,  and  chiefly 
bearing  on  the  questions  of  taxes  (Krehl,  Tourgue- 
nieff,  Hoffman,  Vocke,  Helferich,  Meyer,  Nasse, 
De  Parieu,  Pastor,  Besobrasoff,  Pierson,  Pescatore, 
etc.)  and  of  public  credit  (Hamilton,  Nebenius, 
Massedaglia,  Bunge,  Newmarch,  Capps,  Baxter, 
etc.). 

In  recent  times  financial  science  in  Germany  has 
been  achieving  a  new  development  under  the  influ- 
ence of  the  historical  school  and  of  the  many 
adherents  of  so-called  social  politics.  The  latter 
are,  indeed,  so  far  from  regarding  public  loans  as 
an  evil  often  unavoidable,  that  they  actually  assign 
to  them  a  normal  function  within  the  financial  sys- 
tem. They,  moreover,  teach  that  taxes,  so  far 
from  a  mere    fiscal    expedient,   should    become   a 


lO  TAXA  TION—ITS  PRINCIPLES  AND  METHODS. 

means  for  bringing  about  a  more  equitable  distri- 
bution of  wealth.  Ideas  of  this  order,  discussed  in 
important  works  of  Schaffle,  Dietzel,  Schmoller, 
Laspeyres,  Held,  Scheel,  Neumann,  Friedberg, 
Leser  and  Lehr,  have  now  received  in  the  (still 
incomplete)  Science  of  Finance  of  Adoph  Wagner 
and  in  the  Manual  of  Political  Economy,  under  the 
direction  of  Schonberg,  a  full  and  profound  expla- 
nation, which  is  appreciated  even  by  those  who, 
like  ourselves,  do  not  admit  such  radical  theories. 

In  Italy  the  fiscal  reforms  anterior  to  the  French 
Revolution  had  very  efficient  precursors  and  scien- 
tific promoters  in  the  Milanese,  Beccaria,  Verri 
and  Vergani  ;  in  the  Neapolitan,  Palmieri  ;  in  the 
Tuscans,  Neri  and  Gianni.  Among  the  financial 
economists  of  the  nineteenth  century,  besides 
those  already  mentioned,  Bianchini,  Fuoco,  Pe- 
titti,  and  especially  Scialoja  are  to  be  noted. 

Among  the  living  votaries  of  the  study  of  finance 
Ferrara,  Busacca,  Broglio,  Minghetti,  Boccardo, 
Magliani,  Baer,  Lampertico,  Luzzatti,  Ellena, 
Boselli — not  to  mention  many  others— have  pub- 
lished valuable  monographs.  Of  the  younger 
writers  who  give  great  promise  by  their  talent,  cul- 
ture and  activity,  we  record  the  names  of  Ricca- 
Salerno,  Ferraris,  Salandra,  Piperno,  De  Viti  de 
Marco  and  Pantaleoni.  Praise  should  be  given 
also  to  Alessio,  Zorla  and  Errera. 


PART  II. 
Public  Expenditure. 


CHAPTER  I. 

THE    IDEA    OF    PUBLIC    EXPENDITURE. 

Public  expenditure  is  that  which  is  made  by  the 
competent  authorities,  to  satisfy  the  needs  of  the 
political  society,  by  applying-  the  funds  coming 
from  the  national  estate  {^patrimonio),  of  which,  as 
has  been  already  said,  the  public  estate  (^patrimo- 
nio)  is  a  part. 

Public  is  distinguished  from  private  expenditure, 

ist.  By  the  different  duration  (continuity)  of  the 
persons  for  whose  advantage  it  is  incurred. 

2d.  By  the  monopoly  of  sale  and  of  purchase 
which  bodies  politic  enjoy  in  respect  of  the  pro- 
duction and  consumption  of  certain  goods. 

3d.  By  the  arbitrary  fixing  of  the  price  of  certain 
corporeal  and  incorporeal  goods,  which  are  pro- 
duced by  the  state,  the  province,  or  the  munici- 
pality. 

4th.  By  the  sale  of  certain  goods,  which  at  times 
may  purposely  be  sold  below  cost. 

5th.  By  the  less  varied  nature  of  the  objects 
produced,    which   mainly   depends  upon  the    gen- 


12  PUBLIC  EXPENDITURE. 

erally  subsidiary  character  of  all  public  expendi- 
ture. 

6th.  Through  the  different  criteria  with  refer- 
ence to  which  the  compensation  of  the  individual 
who  gives  his  labor  to  public  business  is  fixed, 
because  : 

{a)  As  there  can  seldom  be  any  participation 
allowed  in  the  profit,  public  production  will  gene- 
rally be  more  expensive  than  private,  by  reason 
of  this  lack  of  individual  interest  on  the  part  of 
public  functionaries,  who  often  depend  on  seniority 
and  on  political  interest  or  recommendation  : 

{b)  As  certain  guarantees  are  offered  for  the 
permanency  of  his  tenure  of  office,  for  the  order  of 
promotions  and  for  pensions,  the  compensation  of 
a  public  functionary  is  almost  always  inferior  to  the 
salary  of  professional  men  who  have  received  a 
similar  scientific  training. 

There  is,  however,  no  noteworthy  difference  In 
results  between  public  and  private  expenditure 
arising  from  the  fact  that  public  expenditures 
usually  are  made  to  secure  benefits  not  material  or 
corporeal  in  their  nature. 

It  is  therefore  equally  mistaken  to  blame  all 
public  services  on  account  of  the  incorporeal  form 
of  the  greater  part  of  the  benefits  that  are  obtained 
by  means  of  them,  as  to  approve  them  all  without 
taking  heed  of  the  objects  to  which  they  are  di- 
rected. 


PUBLIC  EXPENDITURE.  1 3 


CHAPTER  II. 

PUBLIC    EXPENDITURE    IN    ITS    JURIDICAL,    POLITICAL 
AND    ECONOMICAL    ASPECTS. 

In  examining  public  expenditures  in  their  jurid- 
ical aspect,  that  is,  in  respect  to  their  legitimacy,  it 
is  necessary  to  keep  in  view  : 

1st.  The  utility  of  the  object,  considered  in  itself 
and  in  reference  to  other  eventually  more  urgent 
wants  that  have  not  as  yet  been  satisfied. 

2d.   The  universality  of  the  need, 

{<£)  Whether  with  regard  to  the  territory  (de- 
centralization from  a  fiscal  point  of  view), 

{b)  Or  with  reference  to  the  various  classes  of 
society  (the  relation  between  the  distribution  of 
burdens  and  of  political  advantages). 

3d.  The  impossibility  of  providing  for  it  in  any 
other  manner  (individually  or  through  free  associa- 
tions), because  the  public  authority  must  charge 
itself  only  with  the  performance  of  those  services 
which  private  individuals 

{a)  Either  ought  not  to  perform,  as  in  the  case 
of  certain  functions,  which  by  their  nature  are  be- 
yond the  competence  of  private  persons  (such  as 
national  defence, administration  of  justice,  etc.) ;  or, 

ip)  Cannot  discharge  in  a  satisfactory  manner, 


( 

14  PUBLIC  EXPENDITURE. 

from  certain  reasons  of  public  order  and  of  public 
security  (such  as  coinage,  posts  and  telegraphs, 
etc.)  ; 

{c)  Or  in  many  cases  will  not  perform,  whether 
from  lack  of  the  required  knowledge,  or  of  means, 
or  of  the  spirit  of  association,  or  because  when  a 
monopoly  is  actually  unavoidable  the  monopoly  of 
bodies  which  are  the  legitimate  representatives  of 
social  interests  is  in  many  cases  preferable  to  that 
of  associations  having  merely  profit  in  view. 

4th.  The  equality,  or  relation  of  correspondence, 
which  should  be,  as  far  as  possible,  complete,  be- 
tween the  sum  total  of  public  services  and  the 
sacrifice  imposed  on  private  individuals — the  ob- 
ligatory character  of  the  contributions,  or  at  least 
the  arbitrary  determination  of  the  price,  render- 
ing more  manifest  any  injustice  in  their  distribu- 
tion. 

In  this  respect  it  must  not  be  forgotten  that  the 
problem  of  the  limits  of  competency,  even  of 
merely  economic  competency,  between  the  individ- 
ual and  political  societies — an  arduous  problem, 
which  does  not  admit  of  absolute  solution — does 
not  at  all  belong  to  the  Science  of  the  Finances, 
which  is  simply  the  doctrine  of  the  best  means  of 
obtaining  certain  pre-established  ends,  but  must 
be  judged  by  the  light  of  all  the  social  and  politi- 
cal sciences. 

In  the  political  aspect,  that  is,  in  respect  of  the 


PUBLIC  EXPENDITURE.  1$ 

relations  between  financial  mechanism  and  the 
constitutional  and  administrative  arrangements, 
the  excellence  of  the  political  system  has  its  effect 
on  the  financial  system,  and  the  quality  of  the  lat- 
ter, in  its  turn,  reacts  on  the  working  of  the  former. 

In  this  respect  there  are  three  fundamental  rules, 
namely  : 

I  St.  The  expenditures  must  be  acquiesced  in  by 
those  who  furnish  the  means  required  to  defray 
them  (the  tax-payers),  either  directly  or  by  their 
representatives,  in  order  that  they  may  be  able  to 
compare  equitably  the  amount  of  the  benefit  an- 
ticipated with  that  of  the  sacrifice  required  for  its 
attainment. 

2d.  The  authorities  empowered  to  expend  the 
sums  voted  by  the  tax-payers  must  be  placed  under 
the  superintendence  of  other  authorities,  either 
superior  in  official  rank,  or  at  least  must  possess 
sufficient  guarantees  of  independence. 

3d.  The  publicity  of  the  accounts  and  of  the 
documents  relating  thereto,  and  the  publicity  of 
the  discussions  about  them,  whether  these  take 
place  in  political,  provincial  or  municipal  assem- 
blies who  deliberate  upon  the  expenditures,  or  are 
made  known  through  the  press,  are  a  necessary 
guarantee  of  the  best  satisfaction  of  the  require 
ments  of  any  civil  association. 

In  the  economic  aspect,  that  is,  in  respect  of  the 
effects  of  public  expenditure  on  private  economy, 


1 6  PUBLIC  EXPENDITURE, 

we  have  to  guard  against  the  erroneous  conclusions 
of  two  schools  radically  opposed  to  each  other. 

There  are  those  who  maintain  that  all  public 
expenditure  is  always  advantageous,  or  at  least 
harmless,  when  it  is  made  within  the  limits  of  the 
State,  because  the  money  which  is  levied  on  the 
tax-payers  with  one  hand  is  returned  to  them  with 
the  other  in  the  form  of  salaries,  emoluments, 
fees  and  profits,  paid  to  those  who  furnish  goods 
to  the  State,  the  province  and  the  municipality,  or 
who  discharge  the  needed  services. 

This  conclusion,  however,  is  doubly  erroneous. 
To  the  exploded  notion  that  all  exportation  of 
money  is  injurious,  it  adds  the  strange  sophism 
of  the  supposed  restitution  of  money  to  the  tax- 
payers; whilst  it  is  clear  that  in  public  expenditure 
money  is  not  returned  to  them  in  proportion  to 
their  respective  contributions,  but  merely  that 
either  the  tax-payers  themselves,  or  other  persons, 
acquire  new  products  or  advantages,  corporeal  or 
incorporeal,  which,  as  everybody  can  see,  is  a  very 
different  matter. 

On  the  other  hand,  another  no  less  exclusive 
school  regards  all  public  expense  as  always  injuri- 
ous, because  it  resolves  itself  into  a  diminution  of 
the  income  of  private  individuals,  and  hence  into  a 
loss  to  the  industry  of  the  community. 

Yet  this  school  forgets  that  while  it  may  often 
happen  that  public  expenditures  are  injurious,  still 


PUBLIC  EXPENDITURE.  17 

in    the    case  of  many  others  the  injury  resuhing 
from  the   diminution  of  private  income  is  largely 
^compensated  by  the  benefit  obtained  from  the  en- 
hancement of  the  public  resources. 

The  evident  truth  is,  that  we  cannot  approve  or 
disapprove  any  public  expenses  in  the  abstract,  but 
in  order  to  judge  them  we  must  give  heed  to  the 
purposes  for  which  they  are  designed,  purposes 
which  may  be  either  praiseworthy  or  blamable, 
either  absolutely  or  in  relation  to  the  private  em- 
ployments which  may  be  injuriously  affected  there- 
by. Generally,  in  the  economic  aspect,  those  public 
expenditures  can  be  approved  which  do  not  dimin- 
ish either  existing  capital  or  the  possibility  of  its 
regular  increase. 


CHAPTER  III. 

CLASSIFICATION    OF    PUBLIC    EXPENDITURE. 

To  judge  of  the  merit  of  the  various  objects  of 
public  expenditure  does  not  belong  to  the  Science 
of  the  Finances.  It  must  accordingly  abstain  from 
investigations  which  belong  to  other  parts  of  the 
science  of  administration,  and  must  confine  itself 
to  a  simple  classification  of  public  expenditures. 
The  principal  criteria  for  distinguishing  public  ex- 
penditures are  the  form  they  assume,  the  place  and 
the  time  in  which  they  are  made,  their  importance, 


1 8  PUBLIC  EXPENDITURE. 

their  economic  effects,  and  finally  the  purposes  for 
which  they  are  incurred. 

In  regard  to  form,  that  is,  in  respect  of  the  ma- 
terial in  which  disbursement  is  made,  we  have  to 
distinguish  : 

1st.  Expenditure  in  natural  products  (goods  and 
raw  produce),  once  customary  but  now  exceptional. 

2d.  Expenditure  in  money,  once  exceptional 
but  now  customary. 

These  expenditures  comprise  : 

{a)  The  remuneration  of  the  services  of  public 
functionaries,  civil  and  military  ; 

{U)  The  lease  and  rent  of  real  property  ; 

{c)  The  acquisition  of  goods  and  chattels  by  the 
public  administration. 

In  regard  to  place,  that  is,  to  the  source  of  the 
means  acquired,  we  distinguish  : 

I  St.  Foreign  (external)  expenditure;  that  is, 
made  beyond  the  borders  of  the  national  territory. 

2d.  Home  (internal)  expense,  made  within  the 
aforesaid  limits. 

In  regard  to  the  time  in  which  they  take  place, 
we  distinguish  : 

I  St.  The  ordinary  expense  which  repeats  itself  in 
every  fiscal  period,  whether  in  a  constant  or  varia- 
ble amount. 

2d.  Extraordinary  expense,  which  does  not  occur 
constantly,  nor  with  periodical  regularity.  The 
category  of  foreseen  and  unforeseen  expenditures, 


PUBLIC  EXPENDITURE.  1 9 

however,  does  not  correspond  with  this  distinction, 
because  not  all  ordinary  expenditures  can  always  be 
foreseen,  at  least  not  in  their  precise  amount,  nor 
are  all  extraordinary  expenditures  always  unfore- 
seen. 

In  a  somewhat  different  sense  expenditure  Is 
called  ordinary,  the  useful  effect  of  which  merely 
concerns  the  current  fiscal  year,  and  extraordinary, 
that  which  inures  to  the  benefit  of  several  successive 
periods. 

In  respect  of  Importance,  we  distinguish  : 

1st.   Necessary  expense. 

2d,  Useful  expense.  Some  do  not  approve  of 
this  distinction,  maintaining  that  any  necessary  ex- 
pense is  also  a  useful  one,  and  that  any  really  use- 
ful one  may,  in  almost  all  cases,  be  regarded  as 
necessary. 

In  reofard  to  economic  effects,  we  have  to  distin- 
guish  : 

I  St.   Productive  expenditure,  which  Is 

{a)  Either  directly  such,  if  it  Increases  the  public 
estate,  or, 

{p)  Indirectly  such.  If  it  increases  that  of  private 
Individuals. 

2d.  Unproductive  expenditure.  In  which  the 
wealth  consumed  Is  not  sufficiently  repaid  by  the 
usefulness  of  the  services  for  which  it  is  incurred. 

We  must  not  confuse  the  utility  of  public  expen- 
diture with  Its  productiveness.      Unproductive  ex- 


20  PUBLIC  EXPENDITURE. 

penditure    may  be    useful,   or,    indeed,    necessary, 
when  it  satisfies  any  real  and  urgent  want. 

Finally,  in  respect  of  the  purposes  for  which 
public  expenditure  is  intended,  the  following  clas- 
sification may  be  made,  which,  however,  may  be 
varied  in  a  thousand  ways  : 

I.  Constitutional  expenditure;  that  is,  for 

{a)  The  head  of  the  State,  Emperor,  King, 
President,  etc.,  and  in  a  monarchy,  for  his  family 
(civil  lists,  endowments,  appanages,  etc.) ; 

{b)  The  representative  bodies,  national,  provin- 
cial, municipal ; 

{c)  The  highest  governmental  departments  with 
general  powers. 

II.  Expenditure  of  administration;  that  Is,  for 

A.  The  financial  administration,  and  in  particu- 
lar for 

ist.  The  public  domain  ; 
2d.  The  collection  of  taxes  ; 
3d.  The    public    debt    (interest    and    redemp- 
tion) ; 

4th.   The  treasury  and  accounts. 

B.  The  administration  proper  ;  that  Is  to  say, 
{A  A)  Administration  for  purposes  of  public  se- 
curity, and  in  particular  for 

1.  External  security,  and  hence,  for 
{a)  War  and  marine  ; 

{b)  Diplomacy  (missions,  consulates). 

2.  Internal  security  (justice);  hence,  for 


PUBLIC    EXPENDITURE.  21 

{ji)  Repressive  justice  (contentions,  civil  juris- 
diction, i.  e.,  law  courts  for  civil  causes  and  penal 
justice)  ; 

(b)  Preventive  justice  (voluntary  civil  jurisdic- 
tion and  police). 

{BB)  The  administration  of  public  well-being, 
and  in  particular, 

1.  Intellectual  and  moral  well-being;  hence, 
(^)   Public  worship  ; 

(^)   Institutions  of  education  and  learning. 

2.  Material  prosperity  : 

(«)   Physical  (public  health)  ; 

(<^)   Economic;  hence, 

(^aa)  Charitable  and  provident  institutions  ; 

(dd)   Public  works  ; 

(^cc)  Industries  (agricultural,  manufacturing,  com- 
mercial, etc.). 

But  the  practical  distinction  of  public  expendi- 
ture for  departments,  bureaus,  divisions,  sections, 
etc.,  will  never  exactly  coincide  in  any  State  with 
the  scientific  classification  given,  or,  indeed,  with 
any  other  classification.  It  varies  according  to  the 
extent,  the  historical  traditions,  and  the  political 
constitutions  of  the  different  States. 


PART   III. 

Public  Income, 

The  public  income  by  which  the  State,  the  prov- 
ince, the  municipaHty  provide  for  their  own  wants 
is  divided  into  ordinary  and  extraordinary  income. 
The  former  is  collected  regularly  in  every  fiscal 
period ;  the  latter  is  intended  to  provide  for  casual 
deficits. 

The  ordinary  public  income  is  subdivided  into 
original  and  derivative,  the  former  governed  by 
the  common  law  and  the  latter  by  statute.  Not- 
withstanding notable  differences  the  two  coincide 
in  the  main,  because  they  resolve  themselves  into 
two  modes  of  setting  aside  a  portion  of  the  national 
wealth  for  purposes  of  public  utility. 

The  following  is  a  summary  of  the  principal  pub- 
lic receipts  : 

I.   Ordinary  income,  which  is  : 

A.  Original  income,  arising  from  the  property 
of  the  State. 

B.  Derivative  income,  and  therein  : 
1st.  The  proceeds  of  taxation. 

(a)  Special  fees,  costs  and  charges. 
(($)  General  taxes,  commonly  so  called. 


PUBLIC   INCOME.  23 


2d.   Fines,  penalties. 

3d.   Escheats. 

II.   Extraordinary  income,  namely 

A.  The  reserves  of  the  treasury. 

B.  The  sale  of  the  fiscal  domain.. 

C.  Increase  of  taxation. 

D.  Public  loans. 

E.  War  contributions. 


PART    IV. 
Original  Public  Income. 

Original  public  income  is  that  which  the  State, 
province  and  municipality  derive  directly  from  their 
own  property,  in  contrast  with  the  derivative  in- 
come which  they  obtain  indirectly  from  the  obliga' 
tory  contributions  of  private  individuals. 

The  original  income  constitutes  the  fiscal  do- 
main,  in  the  fullest  signification  of  the  term. 


CHAPTER    I. 

IDEA    AND    DIVISION    OF    THE    FISCAL    DOMAIN. 

The  fiscal  domain  comprises  the  wealth,  mov- 
able and  immovable,  possessed  by  the  State,  the 
province  or  municipality,  the  profitable  rights  that 
they  enjoy,  and  the  industries  carried  on  by  the 
same,  under  the  ordinary  regulations. of  law,  with  a 
view  of  obtaining  revenue,  interest  or  profit,  which 
are  designed  to  provide  for  a  part  of  the  public  ex- 
penses. 

In  reference  to  the  mode  of  acquisition,  of  man- 
agement and  of  sale  respectively,  of  the  domanial 


ORIGINAL   PUBLIC  INCOME.  25 

property  and  industries,  they  are  controlled  by  the 
rules  of  common  law,  and  of  the  economic  law  of 
competition,  which  regulates  both  the  cost  and  the 
value  of  the  products  obtained. 

Distinct  from  the  strictly  fiscal  domain,  which  by 
its  nature  is  alienable,  prescriptible  and  productive, 
is  the  public  domain  (unproductive,  imprescriptible 
and  inalienable)  which  the  citizens  enjoy  individu- 
ally and  not  collectively,  and  on  which  the  State, 
province  and  municipality  enjoy  no  true  right  of 
property,  but  only  the  right  and  duty  of  pres- 
ervation and  of  protection.  Such,  for  instance, 
are  the  roads,  canals,  harbors,  coasts,  fortifica- 
tions, etc. 

From  the  fiscal  domain  differ  also  the  fiscal 
monopolies,  which  are  industries  exercised  by  the 
public  authority  independently  of  the  ordinary 
rules  of  law  and  of  competition,  with  a  view  of 
drawing  a  net  product  greatly  superior  to  ordinary 
profit,  and  which,  therefore,  really  includes  an  im- 
post. 

From  the  fiscal  domain  must  further  be  distin- 
guished those  administrative  services  which  the 
State,  province  or  municipality  undertakes,  with  or 
without  monopoly,  from  motives  of  public  useful- 
ness, with  a  view  of  deriving,  not  indeed  a  profit, 
but  a  simple  reimbursement,  either  partial  or  total, 
of  the  expenses  incurred,  and  constituting  accord- 
ingly a  special   tax.     This  frequently  happens  in 


26  ORIGINAL  PUBLIC  INCOME. 

the    managements    of   posts    and    telegraphs,   and 
always  in  the  manufacture  of  coins. 
The  fiscal  domain  comprises : 

A.  Property. 

I  St.  Immovable  (domanial  property  in  a  limited 
sense),  namely  : 

{a)  The  public  workshops  ; 

(<5)  Cultivated  lands,  forests,  mines,  etc.,  owned 
by  the  State. 

2d.   Movable,  namely  : 

{a)  Corporeal  goods,  as  military  implements 
(arms,  ships,  horses,  etc.),  furniture,  documents, 
books,  pictures,  etc.,  and,  in  general,  the  contents 
of  archives,  libraries,  picture-galleries,  museums, 
national  printing-offices,  money  in  the  public  chest ; 

{b)  Incorporeal  goods,  as  rights  of  hunting,  fish- 
ing, etc. 

B.  Industries. 

1st.  Territorial  and  mining,  connected  with  the 
ownership  of  real  estate. 

2d.  Manufactories  (as  national  printing-offices, 
tapestry,  porcelain  and  arms  factories). 

3d.   Commercial,  namely  : 

{a)  Ordinary  commerce  ;  this  is  very  rare  in  the 
present  day; 

(^)  Banking,  which  in  our  day  is  everywhere  car- 
ried on,  not  by  State  banks,  but  by  private  banks, 
with  or  without  special  privileges,  the  government 
being  able  by  means  of  taxation  to  exercise  super- 


ORIGINAL   PUBLIC  INCOME.  2/ 

intendence  over  the  issue  of  notes  payable  at  sight 
or  to  bearer,  and  to  obtain  a  fiscal  revenue  from 
them  ; 

{c)  Posts,  telegraphs  and  railways,  when  they 
yield  a  profit. 

C.   Permits  for  hunting,  fishing,  etc. 


CHAPTER    II. 

ADMINISTRATION    OF    THE    FISCAL    DOMAIN. 

The  administration  of  the  fiscal  domain  can  be 
regulated  by  "  regie  "  (direct  official  management), 
by  contract,  and  (in  the  case  of  real  estate)  by 
lease. 

In  the  first  mentioned,  a  system  once  generally 
prevalent,  the  proprietor  (the  State,  province  or 
municipality)  assumes  the  care  and  risk  of  invest- 
ment in  raw  material,  manufacture  and  sale  of  cer- 
tain products,  and  intrusts  it  to  public  officers,  who 
are  paid  by  fixed  stipends. 

In  this  system,  which  has  the  object  of  securing 
to  the  proprietor  the  entire  profit  of  the  enter- 
prise, the  lack  of  personal  interest  on  the  part  of 
the  administrators  is  to  be  regretted,  as  well  as  the 
many  drawbacks  of  a  bureaucratic  management, 
which  is  invariably  slow,  expensive,  intricate,  some- 
times yields  no  profit,  and  even  results  in  loss. 

By  the  contract  or  farming  system  the  proprietor 


28  ORIGINAL   PUBLIC  INCOME. 

withdraws  from  all  risks,  and  grants  to  others  the 
use  of  the  property  or  the  exercise  of  the  industries 
of  the  fiscal  domain  in  return  for  a  fixed  yearly 
payment  in  goods  or  money. 

In  favor  of  the  contract  system  may  be  adduced 
the  saving  which  the  proprietor  is  able  to  effect  in 
the  expenses  of  administration  and  supervision  ; 
the  greater  revenue  that  is  obtained  by  private, 
free  and  diligent  management ;  the  greater  security 
of  a  payment  fixed  as  to  time  and  amount,  the  pos- 
sibility of  improvements,  and,  in  general,  the  in- 
crease of  the  gross  and  of  the  net  produce,  which 
also  results  to  general  advantage. 

On  the  other  hand,  stress  is  laid  on  the  possibil- 
ity of  conflicts  of  interest  between  the  grantor,  who 
is  most  concerned  about  maintaining  the  property 
intact,  and  the  contractor,  who  wishes  to  derive 
the  greatest  amount  of  produce  while  the  contract 
lasts  ;  hence  there  may  arise  frequent  litigation, 
and  sometimes  fraudulent  bargains,  between  the 
contractors  and  the  agents  who  are  charged  with 
making  the  contracts  and  watching  over  their  ful- 
fillment. 

To  prevent  such  mishaps,  in  part  at  least,  there 
have  been  established  certain  precautions  respect- 
ing the  choice  of  the  contractor  (by  private  con- 
tract or  at  public  auction),  also  in  respect  to  the 
duration  of  the  contract  (at  a  fixed  and  relatively 
long  term  of  duration),  to  the  extent  of  the  grant. 


ORIGINAL   PUBLIC  INCOME.  29 

and  to  the  guarantees  for  the  strict  fulfillment  of 
the  contract  (bond,  inventory,  etc.),  and  concern- 
ing the  regulations  (which  must  not  be  too  many 
or  too  vexatious)  as  to  the  methods  of  manage- 
ment. 

Different  from  contract  (in  the  case  of  real  prop- 
erty) is  also  the  so-called  concession*  in  which  the 
greater  duration  of  the  grant,  the  obligation  of  ef- 
fecting improvements,  and  the  smallness  of  the 
payment  prove  frequently  of  great  advantage  to  the 
administration  and  the  betterment  of  the  property 
of  the  State,  of  municipalities  and  of  charitable  in- 
stitutions, which  in  this  manner  avoid  the  trouble 
and  risk  of  such  improvements,  and  to  which  more- 
over is  assured  a  small  but  safe  revenue. 

Still,  under  different  conditions,  the  progressive 
diminution  of  the  payment  as  equalized  to  money 
throuofh  the  diminished  value  of  the  latter — the 
smallness  of  the  payment  itself  no  longer  corre- 
sponding to  the  produce  of  the  lands — together 
with  the  many  controversies,  especially  in  the  case 
of  an  excessive  subdivision  of  workable  lands,  have 
given  rise  to  a  decidedly  unfavorable  opinion  in 
respect  to  this  system  of  administration  of  the  fiscal 
domain. 

.  There  are  also  mixed  systems  of  administration. 
Among  these  there  is  the  system  of  sharing,  in 
which  the  fiscal  agents  are  made  to  participate  in 

*  A  very  long,  or  perpetual,  heritable  lease  at  a  fixed  rent,     (Rom.  law.) 


30  ORIGINAL   PUBLIC  INCOME. 

the  profits  of  the  undertaking,  in  order  to  stimulate 
their  activity  through  the  hope  of  obtaining  greater 
profits. 

In  the  so-called  system  of  guarantee,  which  at 
one  time  was  much  in  vogue,  the  fiscal  agent,  who 
is  paid  by  a  fixed  stipend,  warrants  to  the  exche- 
quer a  minimum  of  product,  and  divides  with  it  any- 
thing that  may  be  obtained  beyond  this  limit.  But 
it  has  always  been  difficult  to  find  persons  possess- 
ing capital  and  endowed  with  high  administrative 
capacity  who  would  be  inclined  to  charge  them- 
selves with  the  fixed  burden  of  this  guarantee  in 
the  hope  of  enjoying  only  a  part  of  the  greatest 
eventual  profit. 


CHAPTER  III. 

SALE    OF    THE    FISCAL    DOMAIN. 

The  various  systems  of  administering  fiscal  prop- 
erty and  industries  have  almost  always  presented 
very  grave  inconveniences,  which  have  induced  the 
more  civilized  States  to  sell  the  greater  part  of  the 
domain. 

It  is  plain,  if  the  matter  be  considered  in  its  legal 
and  in  its  political  aspect,  that  the  possession  of  a 
large  fiscal  domain  may  produce  a  conflict  of  inter- 
ests between  the  public  authority  and  the  citizens, 
because  the  duty  of  the  equal  protection  of  every' 


ORIGINAL   PUBLIC  INCOME.  31 

order  of  persons  and  property  is  often  forgotten, 
and  through  the  system  of  privilege,  private  prop- 
erty and  private  industry  are  injured  for  the  bene- 
fit of  the  exchequer. 

Besides  this  the  administration  of  the  fiscal  do- 
main increases  the  number  of  public  functionaries, 
heightens  the  influence  of  the  executive  power, 
and  diverts  a  number  of  persons  from  the  careers 
of  private  life.  Nor  should  we  omit  to  mention  the 
danger  contained  in  the  fact  that  domanial  wealth 
furnishes  powerful  means  of  financial  resistance  to 
the  popular  will  expressed  in  the  political  delibera- 
tive assemblies. 

Finally,  in  case  of  war  the  public  estate  is  more 
easily  exposed  to  devastation  and  confiscation  by 
the  enemy,  which  produce  not  only  the  most  serious 
Injuries,  but  also  numerous  legal  conflicts  with  the 
buyers  of  confiscated  property. 

In  the  economic  aspect  the  subtraction  of  a  con- 
siderable quantity  of  property  from  private  owner- 
ship constitutes  a  serious  obstacle  to  industrial  * 
progress,  and  compels  the  citizens  to  much  greater 
sacrifices  than  under  a  system  of  taxation  would 
suffice  to  obtain  greater  revenues  for  the  treasury. 

In  fact,  when  we  consider  the  lack  of  individual 
Interest  in  the  public  functionaries,  the  complica- 
tions, the  slowness,  the  expenses  of  book-keeping 
and  of  supervision, — no  doubt  indispensable,  but 
frequently  inadequate — when  we  consider  the  im- 


32  ORIGINAL   PUBLIC  INCOME. 

perfection  of  the  entire  bureaucratic  management, 
which  is  always  adverse  to  reforms,  and  by  its  own 
constitution  prevented  from  speedily  effecting  those 
small  savings  and  profiting  by  those  favorable  oc- 
casions which  so  materially  contribute  to  the  in- 
crease of  returns,  it  is  not  to  be  wondered  at  if  the 
revenues  of  the  fiscal  domain  prove  small,  or  if  at 
times  they  disappear  entirely  and  are  swallowed  up 
by  expenses.  But  the  capital  obtained  from  their 
sale,  the  amount  of  which  will  bear  due  relation  to 
the  greater  revenue  which  private  industry  could 
derive  therefrom,  may  be  applied  to  a  much  more 
productive  employment,  as,  for  example,  when  used 
for  the  partial  extinction  of  the  public  debt,  the  in- 
terest of  which,  often  very  burdensome,  stands  in 
marked  contrast  to  the  smallness  of  the  income 
arising  from  the  domain. 

Hence  the  sale  of  the  fiscal  domain  is,  in  general, 
to  be  recommended. 

It  may,  however,  produce  the  worse  results  if  it 
is  not  made  with  suitable  precautions.  It  is  neces- 
sary to  take  heed  of, 

I  St.  The  choice  of  what  is  to  be  sold,  and  of  the 
reeulation  of  the  sale  itself,  in  order  that  the  sud- 
den  offer  of  a  great  quantity,  especially  of  real  prop- 
erty, may  not  result  in  loss  to  the  exchequer 
(which  would  receive  a  lower  price)  or  to  private 
individuals,  whose  property  might  be  lowered  in 
value. 


ORIGINAL  PUBLIC  INCOME,  33 

2d.  The  territorial  extent  of  the  property  sold, 
which  should  be  divided  up  in  such  manner  as  to 
invite  the  competition  of  buyers,  due  regard  being 
paid  to  the  systems  of  cultivation  in  different 
countries. 

3d.  The  time  of  the  sale,  which  ought  to  take 
place  in  periods  of  political  tranquillity  and  of 
economic  prosperity,  in  order  to  obtain  good  prices 
and  to  avoid  the  irreparable  loss  of  a  sale  at  an  im- 
proper price. 

4th.  The  persons  to  whom  sale  is  made,  in  order 
to  avoid  as  far  as  possible  the  evils  of  speculation. 

5th.  The  guarantee  offered  for  the  punctual  ful- 
fillment of  the  contract. 

6th.  And  above  all,  the  use  made  of  the  proceeds 
of  the  sale,  which  must  always  be  regarded  as 
capital,  to  be  employed  either  in  the  extinction  of 
old  debts,  or  to  meet  extraordinary  expenses,  for 
which  it  would  have  been  necessary  to  incur  fresh 
debts. 

The  desirability  of  making  sale  of  the  fiscal 
domain,  which  some  advocate  unconditionally,  ad- 
mits, however,  of  a  few  exceptions.  It  may,  for 
instance,  be  important  to  retain  the  possession  of 
certain  public  forests  in  mountainous  localities  or 
on  the  banks  of  certain  rivers  and  mountain 
streams,  from  motives  of  public  health,  and  for  the 
protection  of  private  property.  Also,  from  yet 
different  reasons,  one  may  advocate  the  manufact- 


34  ORIGINAL   PUBLIC  INCOME. 

ure  at  the  expense  of  the  treasury  of  objects  neces- 
sary to  the  civil  and  mihtary  administration,  and 
also,  in  countries  of  a  less  advanced  civilization,  the 
maintenance  of  certain  lands  and  factories  for  pur- 
poses of  instruction  (model  farms,  manufactories 
of  tapestry,  etc.). 


PART  V. 
Derivative  Public  Income. 

Derivative  public  income  consists  of  obligatory 
contributions  produced  by  taxation,  those  sums 
which  the  public  authority  levies  on  the  wealth 
of  private  individuals  in  return  for  the  ser- 
vices rendered  to  them  by  the  administrative  in- 
stitutions of  the  State,  province  or  municipality. 

Such  contributions  are  distinguished  from  the 
fiscal  domain,  and  from  its  products,  both  by  their 
origin  and  their  effects  on  the  national  wealth,  and 
also  by  their  character  as  obligatory  loans,  with- 
drawn entirely  or  partially  from  the  action  of  com- 
petition. 

Taxes  are  either  special  or  general  ;  the  former 
being  more  closely  designated  as  fees,  costs  and 
charges,  the  latter  as  taxes  merely,  or  as  imposts. 
To  the  derivative  public  income  belong  also  fines, 
pecuniary  penalties,  and  in  certain  respects  also 
escheats,  or  unappropriated  goods.  But  by  reason 
of  the  relatively  small  importance  of  the  latter  in 
modern  financial  systems,  it  may  suffice  merely  to 
mention  them  here. 


2,6  DERIVATIVE  PUBLIC  INCOME. 

CHAPTER  I. 

IDEA,     REASON,     AND      FORM      OF      FEES,      COSTS,     AND 

CHARGES. 

In  scientific  language,  fees,  costs,  and  charges  are 
the  remuneration  for  special  public  services  which 
are  rendered  to  private  individuals  at  their  request. 

They  differ,  therefore,  from  ordinary  taxes  ; 

1st.  By  their  object,  because  the  former  refer  to 
special  services  that  have  been  voluntarily  sought, 
and  the  latter  to  general  services  that  are  compul- 
sorily  offered. 

2d.  By  the  criterion  of  the  assessment,  which,  as 
regards  fees,  etc.,  is  the  amount  of  expense  in- 
curred, and,  as  regards  taxes,  the  amount  of  the 
property  of  the  tax-payers. 

As  certain  institutions  that  are  administered  by 
the  public  authority,  either  because  essentially  per- 
taining to  its  competency  (as  the  maintenance  of 
external  and  internal  security,  etc.),  or  because  it 
can  manage  them  better  than  private  industry 
(mint,  post-office,  telegraph,  etc.),  yield  two  kinds 
of  advantages,  the  one  general  and  indeterminate 
to  the  whole  body  of  citizens,  the  other  special  to 
certain  classes  and  persons,  it  is  conformable  to 
reason  that  the  necessary  expenses  for  the  main- 
tenance of  such  institutions  should  be  defrayed 
partly  by  general  taxes  and  partly  by  special  taxes, 
which  means,  in  other  words,  that  these  expenses 


DERIVATIVE  PUBLIC  INCOME.  37 

should  be  defrayed  in  quotas  proportioned  to  the 
wealth  of  the  individual  contributors,  and  to  the 
greater  expense  caused  by  a  portion  of  them.  If 
such  expenses  were  defrayed  solely  from  the  pro- 
ceeds of  general  taxes,  or  solely  from  those  of  spe- 
cial taxes,  there  would  result  privileges  favorable 
to  some  and  injurious  to  others. 

In  order  that  any  fee  be  legitimate,  the  ser- 
vice rendered  must  be  a  real  one,  and  its 
amount  should  not  exceed  certain  limits,  fixed 
precisely  by  the  expense  occasioned  by  the  one 
who  pays  it.'^ 

Such  is  the  criterion  for  the  determination  of 
fees  in  which  no  heed  is  taken  of  the  economic 
condition  of  the  contributors,  except  in  the  two 
following  cases  : 

1st.  Of  absolute  poverty,  in  which  case  exemp- 
tion is  allowed  from  certain  fees,  costs  and  charges 
to  be  paid  for  services  which  are  certainly  special, 

*  The  State  of  Pennsylvania  obtains  net  revenue  of  nearly  $200,000 
per  year  from  the  fees  of  court  clerks,  recorders  of  deeds,  and  registers  of 
wills.  All  these  officers  are  required  to  report  their  fees  to  the  Auditor 
General.  When  the  amount  exceeds  $2,000  per  annum,  they  are  required  to 
pay  one-half  of  the  surplus  to  the  State  treasury,  retaining  3  per  cent,  of  the 
sums  so  paid.  Notaries  public  pay  5  per  cent,  of  their  fees,  and  are  charged 
$25  each  for  their  commissions.  This  method  of  obtaining  a  net  revenue  is 
incidental,  not  direct,  and  is  quite  unobjectionable.  As  it  is  never  possible 
to  adjust  the  fees  precisely  to  the  cost  of  the  service  rendered,  or  the  ex- 
pense occasioned,  it  is  fitting  that  the  excess  received  should  inure  to  the 
benefit  of  the  State.  But  the  officers  charged  with  the  collection  of  the  fees 
must  have  a  sufficient  pecuniary  inducement  to  collect  them  in  full  and  pay 
over  the  State's  portion. — Ed. 


3864S 


38  DERIVATIVE  PUBLIC  INCOME. 

yet  which  should  always  be  rendered  in  the  interest 
of  justice  (court  costs). 

2d.  In  case  of  straitened  means  combined  with 
signal  merit,  where  exemption  is  allowed  from  cer- 
tain charges  for  particular  services  of  mere  utility 
(as  school  taxes). 

In  the  first  case  it  is  equivalent  to  an  alms  ;  in 
the  second,  to  a  prize  awarded  by  the  wealthier 
tax-payers  to  the  poorer  ones. 

If  we  wish  to  distinguish  special  charges  in  their 
relation  to  the  several  administrative  services  that 
may  lay  claim  to  special  remuneration,  we  obtain 
a  classification  analogous  to  that  already  given  in 
the  case  of  public  expenditures. 

We  cite  from  the  great  variety  of  special  taxes 
the  following  merely  by  way  of  example  : 

1.  Public  security. 

{a)  External  (charges  for  exemption  from 
military  service,  for  passports,  consular  fees, 
etc.)  ; 

{b)  Internal:  ist.  Repressive  justice  (court 
costs  and  official  fees,  etc.).  2d.  Preventive 
justice  (permits  for  hunting,  carrying  arms, 
etc.). 

2.  Public  prosperity. 

{a)  Intellectual  and  moral  (school  tax, 
charges  for  dispensations  from  observance 
of  strict  conditions  with  reference  to  mar- 


DERIVATIVE   PUBLIC  INCOME.  39 

riage,   for    naturalization,    decorations,   hon- 
ors,*^ etc.)  ; 
(<5)   Material    (charges   on    coinage,    on    weights 
and  measures,  for  stamping  precious  metals, 
on  railway  service,  posts  and  telegraphs,etc.). 


CHAPTER  II. 

CHARGES     ARISING     IN    MATTERS    OF     JUDICIAL  COGNI- 
ZANCE. 

Those  charges  which  require  special  mention 
may  be  divided  into  court  costs  and  fees  for  certifi- 
cation, registration  and  copies  of  papers. 

Section  i.    Court  costs. 

Court  costs  are  charges  which  are  paid  in  return 
for  certain  special  services  rendered  by  the  State 
on  the  occasion  of  certain  acts  that  are  completed 
in  the  civil  tribunals. 

These  concern  lawsuits  or  litigious  civil  juris- 
diction. 

Their  principal  justification  consists  in  the  par- 
ticular advantage  which  these  judicial  proceedings 
offer  to  certain  persons,  who  ought  not  to  be  al- 
lowed to  enjoy  them  at  the  expense  of  the  mass  ot 

*  In  nearly  every  country  of  Europe  there  is  a  tax  on  the  orders  or 
decorations  bestowed  by  the  sovereign,  and  on  any  rise  in  the  ofificial 
hierarchy,  which  gives  a  distinct  title.     So  also  on  patents  of  nobility. 


40  DERIVATIVE    PUBLIC  INCOME, 

tax-payers.  Another  reason,  but  subordinate  and 
of  a  political  character,  is  the  need  of  putting  some 
restraint  on  litio-ation. 

Court  costs,  however,  should  not  exceed  certain 
limits,  because  otherwise  : 

1.  They  would  become  prohibitive  or  would 
greatly  restrict  the  usefulness  of  judicial  institutions, 
to  the  injury  especially  of  the  poorer  classes. 

2,  They  would  diminish  the  very  great  and  uni- 
versal benefit  which  we  derive  from  a  proper  ad- 
ministration of  justice  independently  of  special 
judicial  aid. 

Court  costs  have  to  be  paid  by  the  losing  party 
in  a  suit  in  due  proportion  to  the  expenses  which 
he  may  have  caused. 

In  the  absence  of  any  established  principle  for 
fixing  charges  of  this  kind,  rules  may  be  framed 
indirectly,  by  reference — 

1.  To  the  rank  and  dignity  of  the  magistrates 
who  hear  and  decide  ; 

2.  To  the  importance  of  their  judgments  ; 

3.  To  the  kind  of  questions  brought  before 
them. 

The  objections  made  by  many  to  court  fees  are 
either  founded  on  the  false  premise  that  the  exist- 
ence of  the  civil  tribunals  is  not  more  useful  to  the 
litigants  than  to  other  citizens,  and  that  taxes  are 
levied  on  the  oppressed  poor  and  not  on  the  rich 
oppressors ;    or   are   only    valid    against    arbitrary, 


DERIVATIVE   PUBLIC  INCOME.  4 1 

excessive  and  badly  distributed  costs — that  is, 
against  tlie  abuse,  and  not  the  use,  of  fees  or  taxes 
of  this  kind. 

Sec.  2.  Fees  for  certification  and  registration. 

These  fees  are  paid  in  return  for  special  services 
rendered  by  the  State  through  the  compilation,  cer- 
tification, preservation  and  multiplication  of  certain 
documents  by  means  of  which  a  right  is  established, 
insured,  chansfed,  transferred  or  extinoruished. 

In  fact,  both  the  civil  judicial  authority  (in  its 
non-litigious  capacity)  and  the  financial  authority, 
as  well  as  the  other  administrative  authorities,  often 
co-operate  toward  enhancing  the  value  of  such  acts, 
by  investing  them  with  certain  solemn  forms,  by  as- 
certaining their  date,  by  inscribing  and  transcrib- 
ing them  in  public  registers,  and  making  authentic 
copies  of  them. 

But  in  this  category  taxes  on  business  transac- 
tions or  contracts  are  not  to  be  included,  and  not 
even  registry  and  stamp  taxes,  because  they  happen 
to  be  collected  in  the  same  method,  which  may 
be  identical  in  form  both  for  official  fees  and  for 
imposts  on  the  transfer  of  property. 

Official  fees  are  essentially  different  from  charges 
on  transfers  : 

1st.  By  the  object,  which  in  the  one  case  is  the 
document  and  in  the  other  is  the  property  trans- 
ferred. 

2d.   By  the  purpose,  because  the  fees  aim  at  ob- 


42  DERIVATIVE    PUBLIC  INCOME. 

taining  a  reimbursement  of  expense,  while  imposts 
aim  at  obtaining  a  net  revenue. 

3d.  By  the  criterion  of  the  assessment,  which  in 
one  case  is  the  amount  of  expense  caused,  but  in 
the  other  is  inferred  from  the  nature  of  the  trans- 
fer, from  the  value  of  the  property  transferred,  and 
from  the  personal  relations  between  those  who 
make  the  transfer  and  those  who  receive  it. 

In  the  case  of  charores  for  official  documents  the 
effort  is  also  made  to  ascertain  the  expenses  caused 
by  individuals  by  having  recourse  to  certain  in- 
direct data  inferred  from  the  nature  and  impor- 
tance of  the  transactions. 

The  distinction  often  met  with  in  practice  be- 
tween fixed  fees  and  fees  proportioned  to  the 
values  involved  in  the  document  is  not  a  sufficient 
argument  to  justify  the  assertion  that  the  fee  has 
been  converted  into  an  impost,  because  within  cer- 
tain limits  the  proportion  may  be  an  indirect  and  ap- 
proximate criterion  of  the  amount  of  expense  incur- 
red for  the  special  advantage  of  certain  tax-payers. 

Sec.  3.  Collection  of  charges  arising  from  mat- 
ters zuithin  judicial  cognizance. 

Both  court  costs  and  charges  for  official  docu- 
ments may  be  collected  according  to  various  sys- 
tems, which  are  either  peculiar  to  them  or  are 
common  to  a  few  indirect  taxes  on  transfers  and  on 
consumption. 

The  distinction  is  to  be  noted   between  the  two 


DERIVATIVE    PUBLIC  INCOME.  43 

systems  of  direct  collection  (made  by  public 
officers)  and  of  indirect  collection  (performed 
through  a  system  of  stamps). 

The  direct  collection  is  made  : 

I  St.  By  the  obsolete,  not  very  creditable  and 
even  dangerous  method  of  so-called  perquisites,  or 
payments  made  by  the  parties  concerned  to  the 
public  officials,  and  accepted  by  the  latter  as  a 
stipend  or  an  addition  to  their  salary. '•' 

2d.  By  means  of  the  so-called  office  charges 
(diritti  di  cancellaria),  belonging  to  the  public 
treasury,  but  collected  by  public  officers,  either 
salaried  or  remunerated  with  a  share  in  the  pro- 
ceeds, who  simply  receive  the  document  or  com- 
pile It  or  make  a  registration  of  it. 

The  indirect  collection,  which  is  made  by  means 
of    a    seal    or   stamp,  which  in  itself  is  not  a  tax, 

*  This  discreditable  and  dangerous  method  of  collecting  fees  and  charges 
is  by  no  means  obsolete  in  the  United  States.  Having  been  adopted  at  a 
time  when  the  fees,  by  reason  of  the  smallness  of  the  business  transacted, 
amounted  to  no  more  than  a  fair  compensatioii  for  the  officers'  time  and 
labor,  the  compensation  increased  with  the  growth  of  States  and  cities  till 
in  some  cases  it  amounted  to  a  princely  revenue.  Then  it  became  a  source 
of  political  corruption.  Offices  of  a  merely  clerical  and  perfunctory  sort 
have  become  prizes  of  such  magnitude  that  poliiical  parties  and  "bosses" 
have  quartered  their  favorites  and  henchmen  upon  the  nominal  holder  of 
the  offices  as  the  price  of  nomination  and  election,  and  have  levied  "  assess- 
ments "  upon  them  corresponding  to  the  aggregate  amount  of  the  fees. 
Every  attempt  to  reduce  the  fees  or  to  turn  the  excess,  over  and  above  a 
fair  compensation,  into  the  public  treasury,  is  fiercely  opposed  by  the  poli- 
ticians who  divide  the  "spoils,"  but  the  tendency  of  opinion  and  of  leg- 
islation is  now  strongly  in  favor  of  the  system  prevailing  in  Pennsylvania, 
mentioned  in  the  note  to  page  37.  —  Ed. 


44  DERIVATIVE  PUBLIC  INCOME. 

offers  the  advantage  that  the  contributor  is  bound 
to  co-operate  at  his  own  risk  and  peril  in  the  col- 
lection of  the  fees,  that  the  secrecy  is  better  main- 
tained, and  that  the  collection  is  rendered  more 
speedy,  less  costly  and  more  consonant  with  the 
dignity  of  the  public  functionaries. 

The  forms  in  which  this  collection  is  made  differ 
as  follows  : 

1.  The  stamp  or  seal  may  be  affixed  by  a  public 
officer  upon  papers  prepared  beforehand,  in  which 
case  we  return  to  the  system  of  direct  collection. 

2.  Stamped  paper  prepared  by  the  State  is 
sold  at  a  profit  by  officers  expressly  appointed, 
and  has  to  be  used  for  the  compilation  of  certain 
documents. 

3.  Separate  stamps  are  manufactured  and  sold 
for  account  of  the  State  that  have  to  be  affixed 
to  instruments  drawn  upon  unstamped  paper. 

The  adoption  of  this  latter  system,  which  is  the 
most  recent,  and  also  the  most  convenient  as  well 
as  least  expensive,  is  daily  gaining  ground,  al- 
though many  precautions  are  required  to  prevent 
frauds,  consisting  in  counterfeiting  the  stamps,  de- 
lay in  affixing  them,  and  in  affixing  the  same 
stamp  successively  to  different  instruments. 


DERIVATIVE  PUBLIC  INCOME.  45 


CHAPTER  III. 

CHARGES  ON  THE  MEANS  OF  EXCHANGE  AND 
OF  TRANSPORT. 

Among  the  charges  imposed  for  administrative 
services  which  relate  to  pubHc  prosperity,  the  first 
place  belongs  to  those  on  the  means  of  exchange 
and  transport,  which  serve  to  defray  the  expense 
required  for  the  maintenance  of  certain  economic 
institutions,  which  for  reasons  of  public  utility  re- 
main in  the  hands  of  the  State.  These  comprise 
charges : 

1.  On  coinage. 

2.  On  the  verification  of  weiorhts  and  measures 
and  on  the  marking  of  the  precious  metals. 

3.  On  railroads,  posts  and  telegraphs. 
Section  i.     Oh  comage. 

The  manufacture  of  coins,  for  which  the  State 
provides  either  directly  by  government  manage- 
ment or  indirectly  by  contract,  forms  a  legitimate 
title  for  the  exaction  of  charges  to  reimburse  a 
part  of  the  corresponding  expense. 

Gratuitous  coinage,  which  would  seem  to  real- 
ize the  idea  of  what  money  should  be,  by  creating 
identity  between  the  value  of  the  metal  and  the 
value  of  the  coin,  would  be  somewhat  dangerous 
in  practice,  because  it  would  continually  promote 


46  DERIVATIVE    PUBLIC   INCOME. 

the  melting  and  exportation  of  new  coins,  and 
thus  encourage  the  speculations  of  goldsmiths, 
money-changers  and  bankers  to  the  injury  of  the 
public,  who  would  receive  only  worn  and  light 
coin. 

On  the  other  hand,  to  extract  from  the  coins  a 
net  revenue  over  and  above  the  reimbursement  of 
the  expense  of  coinage,  which  was  once  practiced 
by  systematic  alteration  of  the  coins  (in  weight, 
fineness  and  value),  must  be  considered  the  worst 
of  all  taxes,  because  it  nominally  raises  prices,  com- 
promises the  certainty  of  contracts,  injures  private 
creditors  who  had  made  bargains  in  the  old  coin, 
and  finally  ruins  the  treasury,  for  whose  benefit  the 
impost  was  intended. 

The  best  system  is  that  in  which  the  State  is 
satisfied  with  a  partial  reimbursement  of  the  ex- 
penses of  the  mint,  and  which  may  be  effected  : 

1.  By  causing  an  equivalent  of  the  expenses  for 
assaying  and  coining,  to  be  paid  by  those  who 
brinof  metal  to  the  mint  to  be  converted  into  coin. 

2.  By  turning  to  account  the  gain  which  it  de- 
rives from  the  minting  of  the  subsidiary  coins,  to 
which  it  will  generally  affix  a  nominal  value  higher 
than  their  metallic  value. 

The  expense  caused  by  the  withdrawal  and  re- 
melting  of  worn  coin  has,  on  the  other  hand,  to  be 
borne  by  the  tax-payers  (by  means  of  imposts),  be- 
cause   it    is    not  in   accord  with  equity  that  they 


DERIVATIVE    PUBLIC   INCOME.  47 

should    be   borne  wholly  by  the   person  who  may 
have  received  them  last. 

Sec,  2,  Charges  on  zvcights  and  nieastu^cs,  and 
on  marking. 

The  authority  of  the  community  should  provide 
for  the  establishment  and  maintenance  of  a  system 
of  weights  and  measures  which  should  be  generally 
obligatory,  and  should  satisfy  the  conditions  of  in- 
trinsic merit,  of  consistency  within  itself,  of  appli- 
cation to  the  whole  territory,  and  of  invariability. 
For  this  reason  the  same  authority  should  be 
charged  with  the  task  of  the  verification  of  weights 
and  measures,  on  which  occasion  there  are  also 
levied  certain  taxes,  originally  paid  by  the  manu- 
facturers, but  which  are  afterward  periodically 
levied  on  tradesmen. 

It  is  only  proper  that  these  taxes  should  be  paid 
by  those  who  have  the  direct  benefit  of  the  official 
verification,  and  who,  at  all  events,  are  able  to  re- 
imburse themselves  through  the  price  of  the  mer- 
chandise sold. 

The  trade  in  the  precious  metals  (gold  and  sil- 
ver) and  in  the  objects  manufactured  from  them 
becomes  sometimes  the  subject  of  a  charge  which 
is  collected  by  means  of  the  application  of  a  stamp 
(obligatory  or  optional)  impressed  by  a  public  of- 
ficer who  certifies  to  their  weieht  and  fineness.  This 
charge  is  also  provided  for  by  the  manufacturers 
and  the  tradesmen;  but  they  obtain  reimbursement 


48  DERIVATIVE    PUBI'iC   hVCOME. 

from  the  buyers,  who  in  this  manner  are  fully 
guaranteed  in  respect  of  the  fine  metal  contained 
in  the  articles,  which  they  would  not  be  able  to 
verify  for  themselves  with  equal  ease  and  accu- 
racy. 

Sec.  3.  Charges  on  railways,  posts  and  tele- 
graphs. 

The  ownership  and  operation  of  railways  are  by 
the  very  nature  of  things,  in  fact  if  not  by  right, 
almost  wholly  removed  from  the  beneficial  action 
of  competition. 

Instead  therefore  of  being  branches  of  industry, 
they  are  institutions  of  public  utility,  necessarily 
subject  to  an  effective  control  on  the  part  of  the 
State,  which  in  many  countries  assumes  the  prop- 
erty of  them,  and  in  some  even  works  them. 

When  the  State  works  the  railways,  reason  de- 
mands that  it  should  obtain  the  reimbursement  of 
the  greater  part,  if  not  the  whole,  of  the  working 
expenses  and  interest  on  the  fixed  and  floating 
capital  invested,  by  means  of  charges  which  are  to 
be  paid  by  those  who  avail  themselves  of  the  rail- 
roads for  the  transportation  of  their  persons  and 
goods,  and  so  derive  a  special  benefit  from  them. 

But  when,  on  the  other  hand,  the  operation  of 
the  railroads  is  in  the  hands  of  companies  under 
State  inspection  and  control,  the  State  usually 
levies  an  impost  on  the  persons  and  things  trans- 
ported, either  in  express  or  slow  trains,  which  im- 


DERIVATIVE  PUBLIC  INCOME.  49 

post  is  anticipated  by  the  companies,  which  obtain 
their  reimbursement  by  raising  their  rates  in  due 
proportion. 

For  still  stronger  reasons  the  postal,  and  now 
also  the  telegraph  service  (except  the  submarine) 
are  becoming  almost  everywhere  concentrated  in 
the  hands  of  the  State,  which,  by  means  of  charges 
on  the  transmission  of  letters  and  dispatches,  ob- 
tains the  total  or  partial  reimbursement  of  the  ex- 
penses of  plant  and  administration. 

The  system  of  postal  and  telegraph  charges  be- 
comes every  day  more  simple,  uniform  and  eco- 
nomical, a  process  promoted  by  frequent  interna- 
tional conferences  and  conventions. 

Prepayment  by  postage-stamps,  the  notable  dim- 
inution and  simplification  of  rates,  the  introduction 
of  postal  and  telegraphic  money-orders,  and  the 
more  recent  one  of  postal  cards  and  postal  packets, 
are  the  most  important  features  of  reforms,  which, 
however,  admit  of  still  further  development. 

The  postal  and  telegraph  charges,  in  which  re- 
gard is  had  to  weight  (for  letters)  and  to  the  num- 
ber of  words  (for  dispatches)  are  now  more  uni- 
form, and  not,  as  formerly,  graduated  according  to 
distances.  The  latter  system  was  too  complicated 
and  costly,  as  well  as  incompatible  with  equity, 
since  it  has  been  ascertained  that  the  element 
of  distance,  imperfectly  estimated  according  to 
the  plan  of  the  so-called  "  postal  and  telegraphic 
3 


50  DERIVATIVE    PUBLIC   INCOME. 

zones,"  has  in  reality  but  little  relation  to  the  cost, 
which  falls  off  considerably  with  the  increase  in 
number  of  letters  and  telegrams,  the  latter  effect 
being  in  great  measure  due  to  the  reforms  above 
mentioned. 


CHAPTER  IV. 

THE    IDEA,   REASON    AND    RULES    OF    GENERAL 

TAXATION. 

A  TAX  is  that  part  of  the  wealth  of  private  indi- 
viduals, which  the  authority  of  the  State,  province 
or  municipality  appropriates  in  order  to  provide  for 
the  public  expenses  incurred  for  the  advantage  of 
the  general  body  of  tax-payers. 

The  reason  of  a  tax  is  evident.  In  order  to  sat- 
isfy certain  collective  wants,  where  it  is  quite  im- 
possible to  decide  what  are  the  expenses  caused  by 
individual  citizens,  and  where  the  direct  perform- 
ance of  personal  services,  which  would  prove  to  be 
uncertain,  inconsiderable  and  badly  distributed, 
would  be  of  no  use,  there  will  be  required  a  com- 
mon fund,  to  establish  which  voluntary  contribu- 
tions would  not  be  adequate. 

To  the  right  of  the  public  authority  to  levy 
taxes  there  corresponds  the  duty  on  the  part  of 
private   individuals   of  paying  them.       Hence   we 


DERIVATIVE    PUBLIC   INCOME.  $1 

must  condemn  the  tolerance  with  which  certain 
moralists  encourage  the  selfish  aversion  which 
some  citizens  entertain  against  payments  of  this 
kind,  extenuating  the  offences  of  those  who  de- 
fraud the  treasury  ;  as  if  such  delinquencies  were 
less  reprehensible  or  less  injurious  than  those  in 
private  life. 

The  science  of  finance  furnishes  a  few  juridical, 
economic  and  political  rules  for  the  regulation  of 
imposts. 

Section  i.    JiuHdical  rules. 

The  tax  must  above  all  possess  the  requisites  of 
legality,  of  certainty,  of  legitimacy,  of  equality  and 
of  morality. 

In  fiscal  matters,  as  in  others,  juridical  considera- 
tions should  prevail  over  economic  and  political 
ones.  As,  however,  the  rigorous  application  of  the 
principle  of  justice  meets  very  serious  difficulties, 
both  in  the  selection  and  the  valuation  of  taxable 
objects,  and  by  reason  of  the  incidence  and  of  the 
repercussion  of  taxes,  which  cannot  always  be  ex- 
actly calculated,  it  follows  that  in  practice  we  must 
be  satisfied  with  an  approximation  to  equity. 

A  tax  is  legal  when  it  has  been  decreed  by  com- 
petent authority  Vv^ith  all  the  solemnities  of  legisla- 
tive enactment,  and  hence,  in  free  States,  with  the 
previous  assent  of  the  contributors,  expressed 
either  directly  by  their  votes  or  indirectly  through 
their  representatives. 


52  DERIVATIVE    PUBLIC   INCOME. 

It  is  certain,  that  is,  not  arbitrary,  when  the  law 
with  precision  and  clearness  determines  its  nature 
(subject,  object,  extent),  the  means  of  determining 
its  distribution,  the  methods  of  collection,  the  fines 
and  penalties  in  cases  of  delinquency,  the  authori- 
ties that  are  to  decide  in  practical  administration, 
and  ultimately  the  judicial  remedies  in  case  of  com- 
plaints from  the  tax-payers,  etc. 

It  is  legitimate  when  its  proceeds  are  effectively 
employed  for  the  advantage  of  the  whole  body  of 
contributors,  an  equitable  relation  between  the 
sum  total  of  the  taxes  and  that  of  the  public  ex- 
penses being  thus  attained. 

The  equality  of  the  tax  relates  to  the  justice  of 
its  apportionment  among  the  contributors,  and  is 
the  fiscal  application  of  the  principle  of  equality  of 
the  citizens  before  the  law.  The  tax  will  be  equal 
not  only  in  name  but  in  fact,  when  it  is  at  the  same 
time  universal  and  rightly  graduated. 

The  universality  of  the  tax  consists  in  the  ex- 
clusion of  every  privilege,  real  and  personal,  be- 
cause it  is  not  equitable  that  any  person  or  corpora- 
tion should  enjoy  a  share  in  the  benefits  of  political 
society,  and  at  the  same  time  be  exempt,  wholly 
or  partially,  from  the  corresponding  burdens.  The 
exemption  of  the  poor  from  certain  taxes  is  a  neces- 
sity based  on  a  fact,  which  resolves  itself  into  a 
special  form  of  public  charity. 

The    graduation   of   taxes    consists    in   a    corre- 


DERIVATIVE  PUBLIC  INCOME.  53 

spondence  between  the  tax  and  the  economic 
condition  of  individual  contributors.  If  the  tax 
should  be  uniform,  notwithstanding  the  economic 
inequalities  between  the  citizens,  it  would  not 
only  be  unjust,  but  also  impracticable,  for,  con- 
sidering the  smallness  of  the  separate  contri- 
butions, which  is  necessarily  implied  by  uniform 
taxes,  the  revenue  derived  would  be  alto- 
gether insufficient  for  the  needs  of  modern  civil 
societies. 

Admitting  the  justice  of  graduation,  it  will  be 
necessary  to  find  an  equitable  and  practical  crite- 
rion to  carry  it  into  effect. 

The  criterion  of  equivalence  between  the  tax 
and  the  services  rendered  individually  to  the  con- 
tributors is  neither  just  nor  possible,  because  the 
value  of  these  services  cannot  be  determined  even 
approximately,  and  because  such  a  system  would 
tend  to  oppress  those  who,  through  weakness, 
ignorance  or  poverty,  stand  in  greater  need  of  the 
protection  of  society,  and  accordingly  derive  greater 
advantages  from  it. 

Nor  is  it  just  or  possible  to  set  up  the  criterion 
of  equivalence  between  the  tax  imposed  and  the 
expenses  caused  by  the  contributors  individually, 
or,  in  other  words,  the  principle,  which  should  gov- 
ern in  the  case  of  fees,  costs  and  charges,  etc.,  be- 
cause there  are  a  great  number  of  public  services 
concerning  which  it  is  impossible  to  decide  what 


54  DERIVATIVE  PUBLIC  INCOME. 

portion  of  the  aggregate  expense  Is  caused  by  each 
contributor. 

And,  finally,  it  is  neither  just  nor  possible  to 
treat  the  impost  as  a  premium  of  insurance  for 
social  protection,  because  the  public  authority  does 
not  limit  its  action  to  the  defence  of  property,  but 
extends  to  personal  security  also,  and  to  the  promo- 
tion of  moral  and  intellectual  well-beino-.  Even  in 
respect  of  property,  the  social  authority  does  not 
assume  any  real  guarantee,  but  only  binds  itself  to 
the  protection  of  private  property,  and  to  the  pun- 
ishment of  crimes  committed  against  it. 

We  must  also  consider  erroneous  the  theory  of 
those  who,  in  order  to  avoid  the  defects  of  the 
criteria  of  the  value  of  services  rendered,  of  the 
expenses  caused,  and  of  the  premium  of  insurance, 
declare  that  the  best  way  of  applying  these  criteria 
is  to  apportion  the  taxes  according  to  the  total 
wealth  of  the  contributors.  It  is  erroneous  simply 
because  the  hypothesis  is  wrong  which  assumes 
that  in  this  manner  services,  expenses  and  pre- 
mium would  become  exactly  proportional  to 
wealth  ;  for  this  theory  also  leaves  out  of  view  the 
fact  that  the  action  of  the  public  authority  is  not 
limited  merely  to  property,  and  that  in  the  matter 
of  insurance  the  premium  must  be  proportioned 
not  only  to  the  value  of  the  goods,  but  also  to  the 
kind  of  risks  against  which  the  property  is  to  be 
insured. 


DERIVATIVE    PUBLIC   INCOME.  55 

In  accord  with  the  more  equitable  and  prac- 
ticable scheme  of  graduation  the  burden  on  the  con- 
tributors should  be  assessed  in  proportion  to  their 
means,  estimated,  in  the  opinion  of  some,  accord- 
ing to  their  estates  ;  in  the  opinion  of  others,  ac- 
cording to  their  income.  Yet,  either  of  these 
principles  being  admitted,  the  advocates  of  propor- 
tional, and  those  of  progressive  or  graduated  taxa- 
tion differ  amonof  themselves  as  to  the  methods  of 
actual  application. 

A  tax  is  called  proportional,  when  the  relation 
between  one's  property  and  the  amount  which  he 
pays  is  invariable  for  all  contributors,  so  that  the 
individual  quotas  increase  in  perfect  correspondence 
with  the  increase  of  wealth. 

On  the  other  hand,  a  tax  is  called  progressive 
where  its  rate  varies  with  the  variation  of  the 
wealth  itself,  so  that  the  quotas  increase  more 
rapidly  than  the  wealth  increases. 

The  adherents  of  progressive  taxes,  who  in  our 
time  are  very  numerous,  and  not  all  of  them  social- 
ists, start  from  the  idea  that  taxation  should,  above 
all  other  considerations,  perform  a  social  function. 
Taxation,  they  say,  should  prevent  the  accumula- 
tion of  wealth  in  few  hands,  or  at  least  should 
bring  it  about  that  the  burden  should  press  equally 
upon  the  tax-payers;  in  other  words,  it  should  con- 
sider what  is  left  to  the  tax-payer  and  not  merely 
what  is  paid,  and  should  bear  upon  what  is  super- 


\^-\\ 


56  DERIVATIVE  PUBLIC  INCOME, 

fluous  rather  than  upon  what  Is  necessary.  They 
thereupon  seek  to  prove  that  fiscal  legislation  fur- 
nishes a  great  many  instances  of  at  least  the  partial 
application  of  this  system,  as  when  a  minimum  is 
fixed  of  property  which  is  to  be  exempt  from  direct 
imposts,  and  when  rents  are  taxed  progressively  ac- 
cordlnor  to  rental  value.* 

*  The  progressive  tax  system  has  been  in  force  in  the  city  of  Basle,  Swit- 
zerland, upwards  of  fifty  years.  Incomes  derived  from  property  pay  on  an 
ascending  scale,  viz.: 

$200  per  year,  about  if^  per  cent. 
4CX)  J 1 0 

600        "  "      4 

800        "  "      4i 

1200        "  "      5 

and  so  on  to  $12,000  per  year,  when  the  tax  is  ten  per  cent.  After  this  the 
rate  of  increase  is  very  slow.  Incomes  derived  from  earnings  are  also  taxed 
progressively  at  about  one-half  the  rate  of  income  from  property.  There 
has  been  a  gradual  but  steady  increase  in  the  progressive  feature  of  taxation  at 
Basle,  accompanied  by  further  exemptions  of  the  smaller  incomes,  until  now 
the  returns  show  that  500  persons,  in  a  total  population  of  60,000,  pay 
eighty  per  cent,  of  the  taxes.  The  democracy  of  Basle  are  apparently  mak- 
ing experiments  to  see  how  far  the  progressive  principle  can  be  carried 
without  causing  a  disastrous  emigration  of  capital.  It  is  certain  that  capital 
is  not  now  increasing  in  Basle.  There  was  a  slight  decrease  from  1884  to 
1887,  but  whether  this  was  due  to  temporary  or  to  permanent  causes  is 
doubtful.     See  London  Econo??iist,  July  9,  1887. 

Progressive  taxation  has  been  adopted  recently  in  the  Canton  Vaud, 
Switzerland,  differing  in  some  details  from  the  system  in  force  at  Basle, 
exemptions  being  allowed  in  proportion  to  the  number  of  children  in  the 
family.  There  has  been  some  emigration  of  capital  from  Lausanne  in  con- 
sequence of  the  progressive  tax,  but  whether  it  amounts  to  a  serious  loss  it 
is  too  early  yet  to  determine. 

The  advocates  of  the  progressive  tax  have  scarcely  been  heard  in  the 
United  States,  all  the  talent  that  would  naturally  be  applied  to  it  being  ab- 
sorbed in  the  effort  to  enforce  the  proportional  tax  by  causing  personal  prop 
erty  to  bear  its  due  share  of  the  public  burdens. — Ed. 


DERIVATIVE   PUBLIC   INCOME.  57 

The  advocates  of  proportional  taxation,  on  the 
other  hand,  deny  the  justice  and  expediency  of 
any  act  of  the  treasury  which  aims  directly  at 
changing  the  distribution  of  wealth.  They  object 
to  the  fixing  of  a  progressive  scale  as  being  arbi- 
trary, since  its  increase,  in  order  not  to  confiscate 
the  entire  fortune  of  the  greater  contributors,  must 
necessarily  stop  short  somewhere  and  precisely  at 
the  point  where  the  rigor  of  the  principle  would 
seem  to  require  greater  severity  in  respect  of  a 
superfluity  of  property  which  has  become  colossal. 
They  moreover  observe  that  progressive  imposts 
would  cause  capital  to  emigrate  or  to  disappear; 
that  it  would  discourage  saving  to  the  injury  of  the 
poorer  classes,  and  that  it  would  be  the  occasion 
of  many  frauds  (fictitious  sales,  divisions  and  trans- 
fers), all  seeking  to  elude  its  rigor.  They  conclude 
finally  that  the  alleged  partial  application  of  pro- 
gressive taxes  Is  really  a  favorable  testimony  to 
the  system  of  proportional  taxation.  And  in  fact 
the  exemption  granted  from  direct  taxes  accorded 
to  persons  of  small  means  is  a  compensation  for  the 
greater  burden  to  which  they  are  subjected  through 
the  faulty  distribution  of  the  Indirect  imposts  on 
consumption  ;  while,  on  the  other  hand,  the  pro- 
gressive taxation  of  rental  value  is  made  on  the 
hypothesis  that  this  is  the  best  method  of  taxing 
proportionally  the  wealth  of  the  contributors, 
which  Is  estimated    by    Its  outward    indication    in 

3* 


58  DERIVATIVE  PUBLIC  INCOME. 

order  to  avoid  the  serious  difficulties  of  direct 
investigation. 

The  morahty  of  an  impost  must  not  be  under- 
stood in  the  sense  that  the  taxation  of  certain  arti- 
cles aims  at  preventing  certain  injurious  or  vicious 
acts,  because  in  order  to  reach  such  a  result  the  im- 
post would  have  to  be  made  prohibitory  and  hence 
would  be  devoid  of  fiscal  effect  ;  but  merely  in  the 
sense  that  the  impost  itself  must  not  be  immoral : 

1st.  In  its  object,  as  if  it  distinctly  taxed  the 
gains  of  vice,  which  should  neither  enjoy  exemp- 
tion, nor  be  subjected  to  any  special  imposts. 

2d.  In  its  effects,  as  if  it  should  incite  to  gambling, 
divert  attention  from  labor,  and  from  habits  of 
saving,  or  encourage  idleness,  ignorance  and  super- 
stition. 

3d.  In  its  application,  as  when  the  impost,  by  its 
excessive  amount  or  by  uncertain,  onerous  or  ex- 
ceedingly lax  methods  of  collection,  offers  an  in- 
centive to  smuggling,  thereby  sacrificing  the  honest 
to  the  dishonest  tax-payer. 

Sec.  2.  Bco7tomic  rules. 

The  principal  economic  rules  of  taxation  are  the 
two  following : 

I  St.  It  should,  when  possible,  tax  the  income 
only,  whether  national  or  individual,  but  spare  the 
estate  itself. 

2d.  It  should  cause  the  least  possible  disturbance 
of  the  natural  development  of  industry. 


DERIVATIVE  PUBIIC  INCOME.  59 

The  former  rule  indicates  the  economic  Hmit  of 
the  impost,  and  points  at  its  true  source  (the  in- 
come) ;  for  it  is  bound  to  protect  and  not  to  dimin- 
ish the  property  of  private  individuals,  in  order 
that  the  sources  of  the  public  receipts  may  not  be 
imperiled. 

The  rule,  however,  has  no  absolute  character, 
for  in  normal  conditions  the  imposts  must  remain  a 
great  deal  below  that  extreme  limit,  while  in  ab- 
normal cases  the  limit  may  be  exceeded  in  order  to 
avoid  greater  evils. 

This  principle  relative  to  the  source  was  by  some 
applied  to  the  subject  matter,  that  is,  to  the  basis 
of  the  impost,  the  contention  being  advanced 
that  imposts  should  be  regulated,  not  according  to 
property  but  according  to  income.  This  is  not 
true  in  an  absolute  sense,  because  the  effects  which 
an  impost  produces  on  the  property  depend  on  the 
fact  and  not  on  the  quality  of  the  impost.  In  fact 
a  light  impost  may  leave  the  property  intact  even 
when  based  upon  property,  while  an  onerous  one 
may  diminish  the  property  even  when  it  is  based 
upon  income. 

The  second  rule  enjoins  such  an  arrangement  of 
the  impost  as  shall  cause  the  least  possible  disturb- 
ance in  the  production,  circulation,  distribution  and 
consumption  of  wealth.  By  this  it  is  not  pretended 
that  all  injurious  effect  from  the  impost  can  be 
guarded    against,    for,    by   reason    of    the    objects 


6o  DERIVATIVE  PUBLIC  INCOME. 

which  it  taxes,  the  s^^stems  of  collection  and  the 
guarantees  required  always  produce  certain  re- 
straints, that  are  more  or  less  opposed  to  the 
liberty  of  the  citizen. 

Sec.  3.  Political  r tiles. 

The  political  rules  of  taxation  refer  to  its  suffi- 
ciency, to  its  flexibility  and  to  the  means  of  collec- 
tion. 

The  tax  should  in  the  first  place  suffice  for  the 
needs  for  which  it  is  intended,  and  be  capable  of 
adaptation  to  the  essentially  variable  nature  of  the 
public  expenses. 

The  means  of  collection  is  the  sum  total  of  th< 
acts  by  which  the  amounts  due  by  the  contributors 
pass  from  their  hands  into  those  of  the  fiscal 
authority.  The  collections  should  be  made  by 
competent  persons,  and  according  to  convenient 
methods. 

In  respect  to  the  persons  charged  with  the  col- 
lection we  have  to  distinguish  the  two  systems  of 
*'  regie  "  or  direct  government  management  and  of 
contract  (farming  of  the  revenue),  as  also  their 
combinations,  among  these  especially  the  so-called 
"co-interested  regie,"  and  the  collection  guaran- 
teed or  executed  by  the  local  communities  even  in 
case  of  State  imposts. 

Public  opinion  in  the  past  was  decidedly  adverse 
to  the  contract  system,  and  is  not  even  now  entirely 
agreed  as  to  its  merits. 


DERIVATIVE  PUBLIC  INCOME.  6l 

Against  this  system  may  be  mentioned  the  ra- 
pacity, arbitrary  acts,  scandalous  fortunes  and  un- 
popularity of  the  contractors  ;  whilst  in  favor  of 
the  "  regie  "  system  it  is  maintained  that  it  is  nat- 
urally lenient,  not  bent  on  private  gain,  and  that 
it  moreover  affords  the  advantage  of  showing 
the  cost  of  collection  accurately  in  the  balance 
sheet. 

In  favor  of  the  contract  system,  particular  stress 
is  laid  on  the  advantage  of  being  able  at  given 
times  to  obtain  fixed  sums,  whilst  the  profit  of  the 
contractors  is  compensated  by  the  saving  of  ex- 
penses growing  out  of  the  inducement  of  profit, 
which  is  wanting  in  the  agents  of  the  treasury.  It 
is  observed,  moreover,  that  the  abuses  of  the  old 
contract  system,  although  greatly  exaggerated,  are 
rather  to  be  attributed  to  the  inherent  faults  of 
any  tax  system  than  to  the  particular  methods  of 
collection  ;  for  the  contract  system,  when  controlled 
and  regulated  by  wise  laws,  has  even  lately  yielded 
excellent  results  in  the  collection,  notably,  of  di- 
rect taxes,  and  it  has  frequently  been  opposed 
merely  from  a  desire  of  administrative  centraliza- 
tion. 

In  respect  of  methods,  the  collection  should 
cause  the  least  possible  inconvenience  to  either  the 
exchequer  or  the  contributors ;  in  other  words,  it 
should  be  prompt,  safe,  economical,  and  not  vexa- 
tious. 


62  DERIVATIVE  PUBLIC  INCOME, 

The  collection  will  be  prompt,  when  it  is  so  ar- 
ranged that  there  are  no  arrearages  left,  and  that 
the  sums  collected  are  forthwith  deposited  in  the 
treasury. 

The  collection  is  safe  when  it  is  subject  to  a 
system  of  accounting  and  to  a  board  of  control 
possessing  sufficient  guarantees  to  prevent  or  at 
least  to  promptly  detect  any  mistakes  or  fraud. 

The  collection  will  be  economical,  when  a  mini- 
mum of  difference  is  reached  between  the  amount 
turned  into  the  treasury  and  that  obtained  from 
the  contributors. 

Finally,  the  collection  will  not  be  vexatious  : 

I  St.  When  the  convenience  of  tax-payers  is  con- 
sulted in  respect  of  time,  place  and  form  of  pay- 
ment, 

2d.  The  process  should  be  simplified  as  far  as 
possible,  useless  formalities  should  be  avoided,  as 
well  as  any  abuse  of  oaths,  examinations,  exhibition 
of  documents  and  other  practices  which  cause  loss 
of  time  to  the  contributors,  undue  restrictions  of 
individual  freedom,  invasion  of  domiciles  and  of 
business  secrets. 

CHAPTER  V. 

REPERCUSSION    OF    TAXES. 

We  call  the  repercussion  {riper cussione,  rim- 
balzo,  traslazione)   of  a  tax   that   process  through 


DERIVATIVE  PUBLIC  INCOME.  63 

which  certain  persons  affected  by  the  tax  succeed, 
by  proportionally  increasing  the  price  of  their 
goods  or  of  their  services,  in  getting  reimbursed 
by  other  persons,  who  are  therefore  the  real  tax- 
payers. 

Such  a  shifting,  which  is  difficult  to  be  deter- 
mined exactly  in  individual  cases,  is  variously 
judged  by  theoretical  writers.  Some  deny  it,  or 
consider  it  vague  and  unimportant  ;  others  (pessi- 
mists) believe  it  to  be  an  unavoidable  disturbing 
element  in  every  financial  system  ;  still  others 
(optimists)  insist  that  it  is  beneficent,  and  repairs 
the  inevitable  inequality  in  the  incidence  of  taxa- 
tion. 

We  must  not  confound  that  repercussion  which 
has  been  foreseen  and  desired  by  the  law-making 
body,  and  which  allows  the  adoption  of  more  con- 
venient methods  of  collection  {c.  g.,  in  certain  im- 
posts on  consumption),  with  the  shifting  of  a  tax 
to  persons  whom  the  treasury  wishes  to  spare. 
In  this  last  case  justice  in  the  distribution  of  taxes 
is  really  impeded. 

A  good  system  of  taxation  should  take  care,  as 
far  as  possible,  that  there  should  be  only  that 
repercussion  that  is  desired  and  intended,  and  no 
other.  For  repercussion  is  often  very  hurtful,  be- 
cause it  frequently  is  effected  by  concealed  means 
(^.  g.,  by  deteriorating  or  adulterating  the  goods 
sold). 


64  DERIVATIVE  PUBLIC  INCOME. 

The  displacement  of  the  economic  consequences 
of  a  tax  by  means  of  an  improvement  in  the  system 
of  production,  which  reduces  its  expenses,  is  far 
different  from  repercussion,  and  is  always  benefi- 
cent in  its  effects.* 


CHAPTER  VI. 

CLASSIFICATION    OF    TAXES. 

Taxes  may  be  divided  into  classes  according  to 
different  criteria,  some  of  which  are  theoretically 
and  practically  important. 

In  respect  of  the  kind  of  property  that  the  tax 
to  be  paid  consists  of  we  have  to  distinguish : 

I  St.  Imposts  in  kind  (provisions,  merchandise, 
services),  which  once  were  the  rule,  but  now  are 
an  exception,  and  to  be  avoided  as  far  as  pos- 
sible ; 

2d.  Pecuniary  imposts  (in  coin,  money),  which 
were  once  the  exception,  but  are  now  the  rule. 

In  respect  of  the  rules  of  assessment,  we  have 

*  The  question  of  shifting  of  taxation  is  not  always  sufficiently  considered 
by  law-makers,  as  it  frequently  enables  the  manufacturer  to  make  a  higher 
profit.  For  example,  the  tax  on  matches  in  the  United  States  and  England 
caused  each  box  of  matches  to  be  sold  at  a  higher  price  than  the  mere  addi- 
tion of  the  tax  would  have  caused,  because  the  tax  was  less  than  the  unit  of 
the  currency.  In  France  it  resulted  in  a  very  great  deterioration  of  quality. 
Similarly  with  the  tax  on  railway  journeys  and  railway  tickets. 


DERIVATIVE  PUBLIC  INCOME.  65 

the  distinction,  already  alluded  to,  of  uniform  im- 
posts and  of  graduated  imposts,  whether  graduated 
proportionally  or  progressively. 

In  respect  of  the  permanent  or  transitory  char- 
acter of  the  Imposts,  we  have  to  distinguish  : 

ist.  The  ordinary  imposts  which  form  an  in- 
tegral part  of  the  financial  system,  and  are  con- 
stantly repeated  in  every  fiscal  period  ; 

2d.  Extraordinary  Imposts  that  are  levied  to 
meet  exceptional  wants  (as,  for  Instance,  in  war), 
and  which  cease  with  their  disappearance. 

In  respect  to  the  nature  of  the  property  sub- 
jected to  taxation,  we  have  the  well-known  distinc- 
tion between  direct  and  Indirect  Imposts  ;  a  dis- 
tinction, however,  which  is  variously  understood 
both  in  science  and  in  practice. 

Some,  In  fact,  call  those  Imposts  direct  which, 
either  effectively  or  according  to  the  intent  of  the 
legislator,  are  a  charge  upon  the  person  who  pays 
them  ;  and  indirect  those  that  are  provisionally  paid 
Into  the  treasury  by  certain  persons,  who  secure 
the  reimbursement  of  them  from  others,  that  Is, 
from  the  real  contributors. 

Others  again  call  those  Imposts  direct  that  are 
founded  on  essential  and  permanent  relations  be- 
tween the  contributors  and  the  treasury,  which 
provides  for  their  collection  at  fixed  times  by 
means  of  a  roll  of  names  ;  and  those  Indirect  that 
are    founded    on    relations   merely  accidental   and 


66  DERIVATIVE  PUBLIC  INCOME. 

temporary,   and  which,  therefore,  are  usually  col- 
lected by  means  of  tariffs. 

Others,  finally,  and,  as  it  seems,  with  more  rea- 
son, call  those  imposts  direct  that  are  levied  on 
wealth  in  its  immediate  manifestations  (persons, 
income,  estate)  ;  and  indirect  those  that  are  levied 
on  the  secondary  manifestations  of  the  wealth  of 
the  contributors,  such  as  transfers  and  consump- 
tion. 

In  respect  to  the  manner  In  which  the  sums  to 
be  paid  are  determined,  especially  in  the  depart- 
ment of  direct  imposts,  are  to  be  distinguished  : 

1st.  Imposts  of  apportionment  or  quota,  where 
the  public  authority,  having  first  fixed  the  sum 
which  it  intends  to  exact,  distributes  it,  or  causes  it 
to  be  distributed,  among  the  various  subdivisions 
of  the  territory  (quotas  for  the  district,  the  prov- 
ince, the  municipality,  etc.),  and  finally  among  the 
single  contributors,  without  fixing  the  individual 
quotas  in  advance  ; 

2d.  Imposts  of  fixed  assessment,  in  which  the 
public  authority  without  more  ado  fixes  the  amount 
to  be  paid  by  each  individual  subject  to  taxation, 
without  determining  in  advance  the  sum  to  be  paid 
in  the  aggregate. 

Where  there  happens  to  be  available  an  exact 
list  of  property  the  difference  between  the  system 
of  apportionment  and  that  of  assessment  is  rather 
a  matter  of  form  than  of  substance. 


DERIVATIVE   PUBLIC  INCOME.  6/ 

The  system  of  apportionment  answers  the  in- 
terests of  the  exchequer  better,  because  it  assures 
a  fixed  return  ;  that  of  assessment  seems  in  gen- 
eral more  conformable  to  justice,  although  it  opens 
a  wider  door  to  frauds. 

Direct  imposts  are  divided  into  : 

1st.  Real  (objective,  impersonal),  when  they  are 
levied  on  property,  without  regard  to  the  personal 
condition  of  the  owner,  and  hence,  without  taking 
his  debts  into  account. 

2d.  Personal  (subjective),  when  they  are  levied 
on  persons  : 

{a)  As  such  (poll  tax). 

{b)  Or  with  reference  to  their  economic  condi- 
tion, as  a  basis  for  the  calculation  : 

{aa)   In  respect  of  income,  or, 

{pF)  Of  property,  or,  as  some  less  correctly  put 
it,  of  capital. 

In  respect  of  the  mode  of  ascertaining  the  prop- 
erty, we  distinguish  : 

1st.  The  rigorous  or  exact  systems,  which  re- 
quire a  precise  determination  of  the  value  of  the 
thing  subject  to  taxation,  which  may  be  made, 

{a)   By  the  payer  (declarations). 

(J))   By  the  fiscal  agent  (official  appraisements). 

{c)  With  the  co-operation  of  both  (verified  dec- 
larations). 

2d.  The  approximative  systems,  that  are  satis- 
fied with  simple  indications,  or  legal  presumptions, 


68  DERIVATIVE  PUBLIC  INCOME. 

concerning  the  value  of  the  objects  subject  to  tax- 
ation. 

In  the  matter  of  direct  personal  imposts  on  in- 
come, we  may  inquire  into  : 

1st.  The  actual  income  of  the  last  fiscal  period 
(for  instance,  during  a  year). 

2d.  The  average  income  of  a  short  definite 
period,  the  variations  being  thus  more  or  less  com- 
pensated (for  instance,  the  average  income  of  five 
or  three  years). 

Direct  objective  taxes,  and  among  the  personal 
taxes  those  on  income  and  on  property,  may  be 
general  or  special,  that  is,  relating  to  all,  or  only 
to  a  few  classes  of  income  and  of  property. 

In  the  following  chapters  we  shall  inquire  into  : 

I  St.  Direct  objective  imposts  on  the  produce  of 
real  property ; 

2d.  Direct  personal  imposts  on  income  from 
movable  property  ; 

3d.   Direct  imposts  on  transfers  of  property  ; 

4th.   Indirect  imposts  on  consumption  ; 

5th.  Direct  personal  imposts  on  income  and  on 
property  in  general. 


DERIVATIVE  PUBLIC  INCOME.  69 


CHAPTER   VII. 

OBJECTIVE  IMPOSTS  ON  THE  PRODUCE  OF  REAL 

PROPERTY. 

The  impost  on  the  produce  of  real  property 
(called  also  predial,  land  and  territorial  Tax)  was 
at  one  time  the  most  important,  and  at  times  the 
only  one,  among  direct  imposts,  and  still  retains 
to-day  an  important  place  in  systems  of  taxation. 
It  is  subdivided  into  the  two  imposts,  on  the  land 
and  the  buildings,  which  generally  are  regulated  by 
somewhat  different  rules. 

Section  i.  Imposts  on  the  produce  of  land. 

The  land  impost  is  levied  on  the  gross  or  net 
produce  of  cultivated  ground  of  every  kind. 

In  order  to  determine  well  the  subject  of  this 
impost,  we  must  know  its  nature  (quality)  and 
amount  (measure). 

If  we  consider  the  nature  of  agricultural  produce, 
it  comprises  : 

I  St.  The  rent,  in  the  technical  sense  of  political 
economy,  that  is,  what  the  land  yields  by  itself  ; 

2d.  The  product  of  the  capital  invested  in  the 
land,  that  is  : 

id)  Of  the  capital  permanently  invested  in  the 
land  for  improvements  of  every  kind  ; 


70  DERIVATIVE  PUBLIC  INCOME. 

{p)  Of  the  working  capital  which  serves  for  the 
cultivation,  without  being  inseparably  connected 
with  the  land  (machines,  implements,  tools,  pro- 
visions, etc.). 

3d.  The  product  of  the  agricultural  labor  (of 
the  farmer  and  his  hired  hands)  as  such. 

By  summing  up  the  rent  and  the  product  of  the 
capital  expended  in  improvements  we  obtain  the 
so-called  proprietary  revenue  ;  by  summing  up  the 
produce  of  the  active  capital  and  that  of  agricul- 
tural labor,  after  deducting  the  wages  of  the  labor- 
ers, we  obtain  the  produce  of  the  enterprise,  that 
is,  the  agricultural  profit. 

In  some  systems,  especially  in  those  founded  on 
lists  of  real  property  (cadaster)  the  tax  on  the  lands 
is  only  levied  on  the  proprietary  revenue,  whilst 
the  agricultural  profit  either  remains  exempt  from 
direct  imposts,  or  is  subject  to  personal  imposts  on 
the  income  of  movable  property. 

If  we  consider  the  measure  of  the  produce  of 
the  lands,  the  imposts  may  be  levied  on  either  the 
gross  or  the  net  produce.  The  former  method  is  the 
more  simple,  but  unjust,  and  has  now  been  aban- 
doned, because  it  overlooks  differences  of  fertility 
and  of  tillage.  By  the  second  method  we  do  not 
inquire  into  the  actual  produce  of  the  year,  but 
rather  into  the  average  produce  of  a  long  period 
(for  instance,  of  a  decade),  and,  more  frequently 
still,   the  usual    produce    of   land    cultivated   with 


DERIVATIVE  PUBLIC  INCOME.  7 1 

ordinary  diligence  according  to  the  systems  of  the 
country  ;  the  variations  are  neglected,  both  as  re- 
gards the  quantity  of  the  harvest  and  the  price 
of  the  crop,  and  the  debts  with  which  the  property 
is  incumbered  are  subtracted. 

For  the  ascertainment  of  the  amount  of  produce 
subject  to  impost,  there  are  three  systems,  viz.,  es- 
timates, lists  and  declarations. 

The  system  of  estimates  is  founded  on  the 
datum  of  an  imperfect  measurement  of  the  land 
combined  with  inferences  drawn  from  the  amount 
of  capital  employed  (plows,  animals,  seeds,  etc.); 
it  is  accordingly  inexact  and  exceedingly  un- 
just ;  in  fact,  it  became  entirely  unbearable  with 
the  increase  of  the  impost,  and  by  degrees  was 
changed  into  the  system  of  descriptions  and  of 
summary  appraisements,  which  serve  as  a  transi- 
tion to  the  more  perfect  method  of  cadaster  (list, 
census). 

The  cadaster  (by  regular  survey  of  parcels) 
takes  as  a  basis  of  the  impost  the  exact  topo- 
graphical description  of  the  property,  inquires 
concerning  the  respective  proprietors,  and  makes 
a  careful  estimate  of  the  produce  of  all  the  sepa- 
rate pieces  of  land. 

In  some  countries  the  cadaster,  besides  its  fiscal 
and  statistical  purpose,  performs  also  the  juridical 
service  of  a  basis  for  the  ascertainment  and  trans- 
mission of  real  property. 


72  DERIVATIVE  PUBLIC  INCOME. 

The  operations  of  the  cadaster  are  technical  and 
economic. 

The  technical  operations  comprise  : 

1st.  The  measurement  of  the  ground,  based  on 
the  geodetical  survey  of  the  territory  in  general, 
or,  rather,  of  the  single  taxable  district. 

2d.  The  topographical  maps  (plots),  which  are 
the  graphic  exposition  of  the  results  of  the  meas- 
urement, and  which  describe  the  grounds  in  their 
several  parcels  or  plots,  distinguished  according  to 
ownership,  collocation,  and  tillage. 

3d.  The  delineation  of  the  boundaries  and  the 
ascertainment  of  ownership. 

The  economic  operations  (estimates)  consist  In 
the  pecuniary  valuation  of  the  taxable  product. 
In  order  to  avoid  the  difficulty  of  individual  esti- 
mates of  the  single  plots,  this  is  executed  accord- 
ing to  a  system  of  classification  ;  whence,  having 
made  the  correct  estimate  of  the  average  produce 
of  a  few  specimen  plots  in  every  census  district, 
and  having  compiled  the  relative  scale  of  the 
prices  of  crops,  the  other  plots  are  divided  into 
classes,  keeping  in  view  the  different  kinds  of  cul- 
tivation and  degrees  of  fertility. 

The  estimates  are  thereupon  completed  : 

{a)  According  to  the  indirect  or  approximative 
method,  which  is  based  either  on  the  purchase 
price  of  the  landed  property  (combined  with  the 
datum   of  the  normal  rate  of  interest),  or  on  the 


DERIVATIVE    PUBLIC   INCOME,  73 

customary  rental  value.  These  data,  however, 
are  very  often  insufficient,  constantly  changing, 
and  not  always  exactly  proportional  to  the  prod- 
uce. 

(<5)  Or  by  the  method  which  some  regard  as 
rigorous  and  scientific,  of  direct  inquiry  into  the 
value  of  the  property  subject  to  impost,  through  es- 
timates, made  by  experts,  of  the  average  or  normal 
produce.  The  first  instance  of  this  was  furnished 
by  the  famous  Milanese  census  in  the  last  century. 

The  cadaster  with  all  its  documents  (maps,  reg- 
isters of  property  and  owners)  must  be  continued  ; 
that  is,  must  be  kept  up  to  date  according  to  every 
change,  whether  in  the  persons  or  the  property  ;  it 
must  also  be  corrected  periodically,  in  order  to 
show  modifications  required  by  the  introduction 
of  new  elements,  by  the  elimination  of  old  ones, 
and  by  the  correction  of  material  errors.  The 
basis  of  the  estimate,  however,  must  always  be 
maintained,  except  in  the  case  of  extraordinary  re- 
visions (perequations).  But  the  adherents  of  the 
so-called  "  consolidation  of  the  land  tax"  raise  very 
grave  doubts  as  to  the  justice  and  convenience  of 
these,  because  they  maintain  that  in  progress  of 
time  the  impost  is  converted  into  a  rent  charge 
which  is  no  burden  to  the  owners  who  already 
have  discounted  it  in  a  capitalized  form  in  the  pur- 
chase price  of  the  property. 

The  system  of  cadaster,  which  in  some  countries 

4 


74  DERIVATIVE  PUBLIC  INCOME. 

was  at  one  time  unquestioned,  has  now  strong 
opponents.  They  complain  of  the  slowness  of  the 
operation  ;  the  excessive  expenses  ;  the  inexactness 
and  inequalities  caused  by  the  decisions  'of  the  ex- 
perts ;  by  the  different  periods  in  which  the  opera- 
tion is  performed,  and  by  the  uncertainty  of  the 
classification  ;  finally,  of  the  unjust  privilege  enjoyed 
by  certain  owners  of  real  property,  the  income 
from  which,  being  augmented  by  successive  im- 
provements, is  subject  to  relatively  trifling  imposts. 
They  accordingly  desire  to  substitute  for  the  system 
of  cadaster  that  of  declarations  of  the  proprietors, 
revised  by  appointed  commissions  of  control,  a 
system  which  they  regard  as  prompt  and  econom- 
ical, having  yielded  satisfactory  results  in  the 
impost  on  buildings,  and  which,  in  accordance 
with  the  requirements  of  justice,  is  levied  on  the 
actual  income,  and  not  on  the  normal  produce, 
which  is  a  mere  abstraction.  In  this  manner  the 
tax  on  the  land  would  become  a  personal  tax  on 
the  income. 

But  the  system  of  declarations  has  likewise  not 
a  few  opponents  who  fear  the  bad  faith  of  the  con- 
tributors, the  difficulty  of  control  and  of  applica- 
tion, especially  in  countries  where  property  is  much 
divided,  where  intellectual  culture  is  slight,  and 
agricultural  book-keeping  imperfect.  They  main- 
tain that  the  system  of  cadaster  is  a  wise  legacy 
handed  down  to  us  by  our  sires,  and  if  not  abso' 


DERIVATIVE    PUBLIC   INCOME.  75 

lutely  perfect,  at  all  events  does  not  afford  oppor- 
tunity for  arbitrary  proceedings;  that  we  are  not 
justified  in  abandoning  this  system,  considering  its 
many  advantages,  other  than  the  purely  fiscal  ones, 
that  well  repay  the  expense  it  causes,  and  that 
finally  the  revisions  made  at  reasonable  intervals 
diminish  its  dangers,  which  are,  in  fact,  unavoidable 
in  any  system  of  taxation. 

Sec.   2. — Imposts  on  the  rent  of  buildings. 

The  impost  on  buildings  falls  on  the  gross  or  net 
revenue  of  all  kinds  of  structures. 

The  direct  impost  on  the  rent  of  the  buildings 
must  be  distinguished  from  the  indirect  impost  on 
dwellings.  The  former  is  levied  immediately  on 
the  mere  income  from  buildings  ;  but  the  latter  falls 
indirectly  on  any  wealth  inferred  from  the  evidence 
of  the  so-called  rental  value  of  the  house,  whether 
inhabited  by  the  owner  or  not. 

Exemptions,  total  or  permanent,  are  allowed  for 
buildings,  which  serve  for  any  purposes  of  public 
defence,  of  worship,  of  beneficence,  and  partial  or 
temporary  exemptions  to  new  structures. 

If  we  consider  the  nature  of  the  rent  derived 
from  buildings,  it  comprises  : 

1st.  That  of  the  ground,  perfectly  analogous  to 
that  of  cultivated  grounds,  and  which  is  extremely 
variable. 

2d.  That  derived  from  the  construction  (from 
the  building  in  a  strict   sense),  to  wit,  the  interest 


76  DERIVATIVE    PUBLIC   INCOME. 

on  the  capital  invested  in  the  building — an  element, 
as  a  rule,  but  slightly  variable. 

If  we  consider  the  measure  of  revenue  derived 
from  buildings,  the  impost  will  fall  on  either  the 
gross  or  on  the  net  revenue,  which  latter  is  ob- 
tained by  deducting  from  the  gross  receipts  the  ex- 
penses of  repair,  insurance,  and  the  yearly  fund  for 
reconstruction. 

In  imposts  on  buildings,  the  various  purposes  for 
which  they  serve  are  often  kept  in  view.  Hence 
we  should  distinguish  : 

I  St.  Farm  dwellings,  cottages  intended  for  the 
use  of  laborers,  for  the  housing  of  cattle,  for  the 
Storage  and  first  manipulation  of  agricultural  prod- 
ucts. 

2d.  Town  habitations  in  the  more  populous 
centres. 

3d.  Manufactories,  in  the  case  of  which  we  must 
keep  in  view  the  large  deductions  required  for  re- 
pairs, insurance,  etc.,  etc. 

Farm  dwellings  are  usually  subject  to  the  land 
tax  (forming  generally  a  part  of  the  cadaster),  be- 
cause they  are  considered  as  intended  for  the  pro- 
duction of  an  income  from  cultivated  land. 

For  the  ascertainment  of  the  taxable  income  we 
may  adopt  as  in  the  case  of  the  land  tax  the  three 
systems  of  signs,  official  estimates  and  declarations. 

The  system  of  signs,  although  once  common,  is 
very  imperfect,  because  it  infers  the  amount  of  the 


DERIVATIVE  PUBIIC  INCOME.  77 

revenue  from  the  uncertain  criterion  of  the  number 
of  hearths,  or  of  rooms,  or  of  openings  (doors  and 
windows)  toward  the  street.  Even  irrespective  of 
the  inconveniences  which,  without  any  profit  to 
exchequer,  the  tax  on  doors  and  windows  may  pro- 
duce, especially  in  the  case  of  houses  inhabited  by 
the  poorer  classes,  it  remains  certain  that  the 
aforesaid  elements  are  anything  but  correctly  pro- 
portional to  the  income. 

In  the  system  of  official  estimates  we  may  adopt 
the  approximative  method,  based  on  the  data  of 
purchase  price,  of  cost  of  construction,  or  better 
still  on  that  of  the  rent ;  or  the  more  rigorous 
method  of  estimates  by  experts,  simplified  as  in 
the  cadaster  of  landed  property  by  means  of  classi- 
fication. 

The  houses  inhabited  by  their  respective  owners 
which  give  them  a  latent  revenue  (saving  of  ex- 
pense) should  also  be  subject  to  taxation. 

Also  houses,  or  the  parts  of  them,  which  are  not 
inhabited,  and  which  do  not  yield  any  return,  are 
frequently  charged  with  an  impost,  because  the 
lack  of  income  is  considered  as  only  temporary. 

The  system  of  declarations,  although  dangerous 
and  on  this  account  opposed  by  many  theorists, 
still  finds  greater  favor  when  it  is  applied  to  con- 
structions and  not  to  the  soil. 

It  is,  in  fact,  to  be  observed  : 

I  St.   That  for  town  buildings  the  declarations  of 


78  DERIVATIVE    PUBLIC   INCOME. 

the  owners  can  easily  be  verified  by  the  datum  of 
the  rents. 

2d.  That  when  the  declarations  are  revised  at 
certain  intervals  (leaving  aside  the  abstraction  of 
"  normal  produce  "),  the  impost  may  keep  pace 
with  the  very  appreciable  variations  of  the  effective 
income. 

3d.  That  at  all  events  the  system  of  the  ofiicial 
estimates,  proceeding  by  classes  and  averages, 
under  normal  conditions  at  least,  presents  dangers 
that  certainly  are  not  less  than  those  of  the  system 
of  declarations. 

By  the  system  of  declarations  accordingly  the 
tax  on  buildings  may  be  entirely  or  partly  trans- 
formed into  a  personal  tax  on  income. 


CHAPTER  VIII. 

PERSONAL     IMPOSTS    ON     INCOME    DERIVED    FROM 
MOVABLE    PROPERTY. 

In  a  perfect  system  of  direct  imposts  we  should 
tax  the  income  from  personal  property,  which  in 
our  time  has  greatly  increased. 

This  income  is  divided,  in  respect  of  its  source, 
into  : 


DERIVATIVE   PUBLIC  INCOME.  79 

1st.   Income  from  capital. 

2d.    Personal  income. 

3d.     Industrial  income. 

Section  i. — Imposts  on  income  derived  from 
capital. 

The  impost  on  the  returns  of  capital  falls  on 
the  gross  or  net  income,  average  or  actual,  verified 
or  presumed,  obtained  from  movable  property,  in- 
dependently of  the  exertion  of  the  owner. 

Income  from  capital  is  distinguished  according 
to  the  person  (individual  or  collective,  public  or 
private),  according  to  its  duration  (perpetual  or 
temporary),  and  according  to  the  character  of  the 
payment  (interest  or  annuities,  and  the  latter  an- 
nuities for  life  or  for  a  fixed  term). 

Against  imposts  on  income  derived  from  capital, 
whether  general  or  special,  many  objections  are 
made,  and  stress  is  laid  particularly  on  the  injustice 
of  the  double  taxation  of  the  same  thing  (as  for 
instance  the  mortgaged  land  and  corresponding 
credit),'^'  the  repercussion  of  the  impost  from  the 
lender  to  the  borrower,  which  alters  its  character  ; 
its  dangerous  effect  on  existing  capital,  and  on  the 
accumulation  of  new  capital,  the  unavoidable  in- 
equality of  treatment,  according  to  the  degree  of 
facility  with  which  it  can  be  concealed,  the  con- 
tinuous chancres  of  the  amount  of  income  derived 

*  See  Note  on  Taxation  of  Mortgages  p.  136. 


8o  DERIVATIVE    PUBLIC  INCOME. 

from  it,  and  the  inevitable  imperfections  of  the 
method  of  collection. 

But  these  objections  (in  part  utterly  erroneous) 
are  untenable  when  confronted  with  reasons  of  jus- 
tice, which  condemn  any  form  of  privilege,  and 
which  must  prevail  over  the  apprehension  of  un- 
certain and  indeterminate  repercussions,  and  over 
fears  of  the  destruction  of  capital,  which  are  ad- 
missible only  in  the  case  of  imposts  which  are  ex- 
cessive or  unfairly  distributed.  The  difficulties 
are  certainly  real,  but  not  insurmountable,  nor  at 
all  greater  than  those  met  with  in  the  taxation  of 
other  receipts  from  movable  property. 

The  impost  should  fall  on  the  full  returns  of  the 
capital  (interest  or  annuity)  without  the  deduction 
of  either  premium  for  risk  or  of  the  sinking-fund 
comprised  in  the  annuity.  Otherwise  it  would  un- 
duly favor  uncertain  and  temporary  incomes,  and 
it  would  be  forgotten  that  the  lesser  duration  of 
the  impost  corresponds  with  the  lesser  duration  of 
the  income. 

This  impost  usually  falls  on  the  actual  or  aver- 
age income  of  a  relatively  short  period  (for  in- 
stance, of  three  years),  and  the  amount  of  the  tax 
is  less  than  that  of  other  direct  imposts.  But  such 
inequality  of  treatment  does  not  find  sufficient  sup- 
port in  the  reasons  of  convenience  that  are  alleged 
in  its  favor. 

For  the  application  of  imposts   on  income  de- 


DERIVATIVE  PUBLIC  INCOME.  8 1 

rived  from  capital,  we  must  distinguish  between 
two  different  systems;  that  of  the  indirect  taxation 
of  the  debtor  required  to  be  reimbursed  by  his 
creditor,  and  that  of  the  direct  taxation  of  the 
latter. 

In  favor  of  indirect  taxation  may  be  adduced  the 
greater  facility  and  simplicity  of  collection,  the 
avoidance  of  publicity,  the  less  danger  of  double 
taxation,  and  also  the  possibility  of  taxing  the  capi- 
tal of  strangers. 

Aeainst  indirect  taxation,  on  the  other  hand, 
there  are  the  dif^culties  of  exercising  the  right  of 
retention  granted  to  the  debtor ;  the  difficulty  of 
putting  in  practice  the  exemption,  which,  however, 
is  necessary,  of  the  smallest  incomes,  and  finally 
the  impossibility  of  its  falling  on  capital  invested 
in  foreign  countries,  or  lent  to  persons  who  do  not 
pay  other  direct  taxes. 

Direct  taxation  takes  place  either  by  means  of 
official  estimates  or  on  the  basis  of  declarations 
supervised  by  appropriate  commissions  ;  but  these 
methods  present  much  greater  defects  than  those 
already  noticed  in  their  application  to  the  land 
tax. 

In  practice,  certain  eclectic  methods  have  been 
at  times  adopted  with  varied  success,  in  which  the 
proceeding  is  partly  by  retention  (indirect  taxa- 
tion), and  partly  by  declarations  verified  by  the  fis- 
cal agents,  and  by  commissions  of  honest,  experi- 


4* 


82  DERIVATIVE    PUBLIC  INCOME, 

enced  men,  keeping  in  view  the  different  kinds  of 
income,  and  not  infrequently  with  the  assistance  of 
certain  presumptions  (for  instance,  that  of  rental 
value). 

The  taxation  of  the  public  funds  (the  public 
debt  of  the  State,  the  municipality,  etc.)  has  long 
formed  the  subject  of  controversies  that  have  not 
been  completely  nor  everywhere  settled. 

The  opponents  of  such  taxation  proclaim  that  it 
is  unjust  because  it  confiscates  a  certain  amount  of 
capital  corresponding  to  the  impost ;  because  it  re- 
solves itself  into  a  disguised  partial  bankruptcy  of 
the  debtor  government,  which  arbitrarily  reduces 
the  interest  and  violates  the  agreement  of  exemp- 
tion from  tax  solemnly  entered  into  with  the  cred- 
itors, and  because  it  deals  a  deadly  blow  at  the 
public  credit,  and  prevents  the  negotiation,  at  tol- 
erable rates,  of  loans  that  may  be  needed  here- 
after. They,  moreover,  observe  that  the  embarrass- 
ments caused  by  the  problem  of  the  taxation  or 
exemption  of  foreigners,  the  inefficiency  of  the 
means  of  collection  by  declarations  that  are  es- 
caped by  those  holding  obligations  payable  to 
bearer  (coupons),  and  the  vexations  of  a  method 
of  collection  enforced  by  means  of  retention,  are 
sufficient  to  dissuade  altogether  from  an  impost  of 
this  kind. 

Still  the  advocates  of  this  impost  (which,  more- 
over, is  daily  gaining  ground),  with  better  reason, 


DERIVATIVE  PUBLIC  INCOME.  83 

as  it  seems,  base  their  assumptions  on  principles  of 
justice  and  equity,  which  are  opposed  to  fiscal 
privileges  in  favor  of  the  creditors  of  the  State, 
who  should  not  be  released  froni  the  fulfilment  of 
the  duties  of  citizens.  They  observe,  moreover, 
that  the  assurances  of  exemption  that  have  been 
given  are  either  null  and  void,  if  they  grant  an 
absolute  and  general  privilege,  or  must  be  inter- 
preted as  simple  promises  of  exemption  from  spe- 
cial imposts  on  the  evidences  of  the  public  debt; 
that  a  moderate  impost  does  not  produce  the  an- 
ticipated evils,  because  the  tendency  toward  a  de- 
cline of  the  public  credit  may  be  balanced  by  a 
tendency  toward  a  rise  owing  to  financial  improve- 
ment, partly  due  to  the  impost  itself  ;  and  finally, 
that  the  alleged  pretext  of  the  difficulty  of  collec- 
tion cannot  make  head  against  the  principle  of 
justice  ;  in  a  word,  that  this  kind  of  difficulty  is 
common  to  every  direct  impost  on  personal  prop- 
erty, and  not  peculiar  to  that  on  the  public  funds.* 


*  The  author  here  gives  an  apparent  sanction  to  the  argument  in  favor  of 
the  taxation  of  public  securities,  even  though  an  express  agreement  has  been 
made  that  they  should  be  exempt.  I  cannot  agree  with  this  view.  The  State 
should  set  no  questionable  example  to  the  citizen.  Granted  that  the  ex- 
emption was  wrong  in  the  beginning  and  ought  not  to  have  been  decreed  : 
granted  that  taxation  ought  always  to  be  equal,  or  as  nearly  so  as  human 
contrivance  can  make  it  :  still,  the  highest  public  interest  is,  that  the  State 
shall  not  seem  to  be  a  cheat. 

The  earlier  acts  of  Congress,  under  which  our  war  debt  was  au- 
thorized, exempted  the  bonds  of  the  United  States  from  State  and  muni- 
cipal taxation  only.     The  act  of  July  14,  1870,  under  which  the  outstand- 


84  DERIVATIVE  PUBLIC  INCOME. 

The  duty  of  foreigners  to  pay  the  impost  may  be 
open  to  considerable  discussion,  if  it  be  a  question 
of  personal  impost  ;  but  on  the  other  hand  it  seems 
admissible  if  we  look  upon  this  as  an  objective  im- 
post ;  that  is,  levied  on  the  sum  total  of  products 
obtained  from  the  country.  In  this  way  we  may 
overcome  the  serious  practical  difficulty,  incident 
to  the  exemption  of  foreigners,  namely,  that  it  af- 
fords to  natives  the  opportunity  of  avoiding  the 
payment  of  the  impost  by  having  their  interest 
drawn  in  foreign  countries. 

Against  the  system  of  retention,  opponents  al- 
lege the  inflexible  character  by  which  it  is  distin- 
guished, and  which  changes  the  original  nature  of 
the  impost  ;  the  difficulties  which  it  presents,  both 
in  the  calculation  of  the  sums  due  and  in  the  ex- 
emption of  the  smallest  incomes,  and,  finally,  also 
in  its  application  to  provincial  and  municipal  im- 
posts, where  the  collection  is  made  through  the 
treasury  of  the  State. 

But  the  advocates  of  retention  do  not  admit 
that  a  simple  method  of  collection  can  change  the 
nature  of  the  impost  ;  they  allege  the  little  or  no 
result  which  the  impost  would  yield  without  reten- 
tion, and  the  facility  of  its  application,  which  re- 

ing  4  and  4^  per  cents  were  issued,  went  a  step  farther  and  exempted 
these  issues  from  "all  taxes  or  duties  of  the  United  States,"  as  well  as 
from  all  local  taxation,  and  these  exemptions  are  printed  on  the  face  of 
the  bonds. — Ed. 


DERIVATIVE    PUBLIC  INCOME.  85 

solves  Itself  into  a  mere  balancing  of  credits  and 
debts  ;  and  they  observe  that  it  is  possible  to  rem- 
edy, at  least  partially,  the  other  notable  defects  by 
applying  measures  that  have  been  adopted  by 
those  States  which  already  practice,  with  signal 
success,  the  system  of  retention. 

Sec.  2. — Imposts  on  personal  income. 

Personal  incomes  are  those  derived  from  labor, 
past  or  present,  and  are  divided  into  salaries  and 
pensions  (of  public  functionaries),  fees  (of  those 
who  follow  the  so-called  learned  professions),  and 
wages  (for  manual  labor). 

These  incomes  are  certain  or  uncertain  (as  to 
duration),  and  fixed  or  variable  (as  to  amount)  ; 
both  kinds  should  be  subject  to  tax,  for  no  reason 
can  be  adduced  in  favor  of  exemption. 

The  arguments  frequently  adduced  in  support 
of  the  exemption  of  salaries  and  pensions  are,  that 
the  impost  would  seem  to  be  an  arbitrary  diminu- 
tion of  the  agreed  compensation  ;  that  it  would  be 
injurious  to  the  service  by  reason  of  the  tempta- 
tions to  which  the  public  officials  would  find  them- 
selves exposed  when  they  are  not  sufficiently  paid  ; 
and  that  to  take  away  with  one  hand  what  has 
been  eiven  with  the  other  is  to  brino-  about  a  use- 
less  and  costly  complication  of  accounts.  These 
arguments  are  insufficient. 

In  point  of  fact,  the  State  has  not  merely  special 
duties  toward  the    public  functionaries,   but    it  is 


86  DERIVATIVE    PUBLIC   INCOME. 

also  In  general  committed  to  a  fair  apportionment 
of  taxation,  because  any  favor  granted  to  one  class 
results  only  In  a  burden  unjustly  laid  on  others. 
Besides,  Imposts  do  not  prevent  the  fixing  of  sal- 
aries at  a  fair  rate,  nor  can  It  be  regarded  as  a  use- 
less complication,  because  In  a  good  administrative 
system  salaries  are  not  frequently  changed;  be- 
cause In  this  way  the  appearance  of  privilege  Is 
avoided,  and  because  finally  a  faithful  mirror  is 
thus  obtained  of  the  receipts  and  expenditures 
relating  to  salaries  and  pensions. 

But  neither  the  ease  of  collection,  nor  the  diffi- 
culty of  repercussion,  nor  the  impossibility  of  con- 
cealing the  amount  of  Income  can  at  all  justify  a 
less  rate  of  taxation  on  salaries  and  pensions  ;  in- 
deed. It  is  hardly  a  creditable  course  to  diminish 
the  charge  of  certain  contributors  merely  on  the 
hypothesis  that  there  may  be  others  who  fraudu- 
lently evade  the  burden. 

Professional  Incomes  are  frequently  made  sub- 
ject to  imposts  In  company  with  Industrial  incomes 
rather  than  with  other  personal  receipts. 

Incomes  from  manual  labor  must  also  be  subject 
to  Impost,  because  an  exemption  would  be  contrary 
to  proportional  equality,  except  only  In  the  case  of 
incomes  that  are  barely  sufficient  for  the  support 
of  the  workman. 

On  the  other  hand,  it  may  be  questioned  whether 
it  Is  more  suitable  to  subject  this  class  of  incomes 


DERIVATIVE  PUBIIC  INCOME.  8/ 

to  personal  tax  (in  the  strict  sense),  or  to  the  in- 
direct tax  on  consumption. 

These  personal  imposts,  which,  in  the  stricter 
sense,  aim  at  persons  independently  of  their  prop- 
erty, are  called  special  when  they  are  levied  on  a 
definite  class  of  contributors  ;  and  are  called  gen- 
eral when  they  tax  all  the  adult  male  contributors 
who  are  able  to  earn  a  living. 

And  in  respect  of  their  assessment  they  are  uni- 
form (as  the  poll  tax  or  the  hearth  tax),  or  gradu- 
ated, when,  deviating  somewhat  from  their  origi- 
nal character,  they  admit  of  a  classification  of  the 
contributors  based  on  their  rank,  or  better  still,  on 
their  general  economic  condition,  if  not  in  exact 
ratio  with  their  wealth. 

If  we  compare  general  personal  imposts,  and 
those  on  the  consumption  of  certain  products  of 
universal  use,  considered  as  a  means  of  causing  the 
incomes  derived  from  manual  labor,  and  in  general 
those  of  the  poorer  class  to  contribute  to  the  im- 
post, we  find  that  both  plans,  regarded  alone,  with- 
out reference  to  the  tax  system  in  its  totality,  have 
the  fault  of  inequality,  and  even  that  of  being 
odious.  By  advancing  the  comparison  a  little  fur- 
ther, we  find  that  personal  imposts  also  have  the 
special  defect  of  difficulty  and  excessive  harshness 
in  execution  ;  they  yield  but  a  small  revenue  by 
reason  of  the  many  and  necessary  exemptions ; 
they  cause   serious   discomfort   to   a    considerable 


88  DERIVATIVE    PUBLIC    INCOME. 

number  of  tax-payers,  who  will  not,  or  do  not 
know  how  to  keep  in  reserve  the  sums  that  must 
be  paid  at  fixed  times.  On  the  other  hand,  indi- 
rect imposts  are  collected  more  easily;  they  are 
mixed  with  the  price  of  certain  articles  of  daily  use, 
and  are  even  (when  they  spare  objects  of  absolute 
necessity)  to  a  certain  extent  voluntary,  at  least 
in  their  amount.  Again,  we  cannot  overlook  their 
signal  merit  in  avoiding  personal  contact,  not 
always  desirable  between  fiscal  agents,  who  are 
often  hated,  and  contributors  not  properly  con- 
vinced of  the  benefits  conferred  by  the  govern- 
ment, but,  on  the  contrary,  impressed  with  the  ap- 
parent injustice  of  taxation  that  is  seldom  exactly 
proportioned  to  the  means  of  those  who  have  to 

pay. 

In  general,  we  may  also  observe  that  the  various 
dep-rees  of  intellectual  culture,  of  morality,  of  pa- 

o 

triotism  and  foresight,  as  well  as  the  more  or  less 
widely  spread  consumption  of  certain  products,  are 
all  very  important  elements  in  deciding  in  a  given 
case  to  which  of  the  two  systems  the  preference 
should  be  given. 

Sec.  3. — Imposts  on  inditstiHal  income. 

Industrial  incomes  are  those  derived  from  the 
business  of  manufacturing  or  trade.  They  accord- 
ingly comprise  the  return  for  invested  capital,  com- 
pensation for  the  work  of  direction  and  of  constant 
attention  on  the  part  of  the  entreprerteMVy  and  the 


DERIVATIVE    PUBLIC   INCOME.  89 

premium  for  the  risk  inherent  in  the  enterprise. 
Such  incomes  are  also  called  mixed,  because  they 
are  derived  both  from  capital  and  from  labor. 
When  they  are  derived  from  joint  undertakings, 
exercised  by  stock-companies,  they  are  called  divi- 
dends. 

We  cannot  admit  as  valid  reasons  for  the  ex- 
emption of  industrial  incomes  from  taxation,  either 
the  alleged  repercussion  upon  the  consumers,  nor 
their  constant  variability,  nor  the  apprehended  dis- 
couragement of  industry,  nor  even  the  difficulty  of 
collection,  by  some  denounced  as  arbitrary,  or  such 
as  to  impair  the  credit  of  the  managers,  to  whom 
secrecy  is  a  matter  of  business  necessity. 

The  impost  should  fall  on  the  net  income,  and 
should  accordingly  allow  the  necessary  deductions 
for  the  replacement  of  the  capital  consumed  in 
production  and  in  the  payment  of  interest  and 
wages  for  capital  and  labor.  On  the  other  hand, 
deductions  must  not  be  allowed  for  the  interest  of 
passive  capital  not  invested  in  the  enterprise,  and 
which  accordingly  does  not  assist  in  producing  the 
income,  still  less  for  the  sums  required  for  the  sup- 
port of  the  proprietor  and  of  his  family. 

The  tax  on  industrial  income  inquires  into  the 
actual  income,  or  the  average  or  normal  (ascer- 
tained or  presumed)  income  for  a  certain  short 
period  (for  instance,  of  three  years). 

In  the  practical  arrangement  of  this  impost,  two 


90  DERIVATIVE  PUBLIC  INCOME. 

systems  of  investigation  contend  with  each  other 
for  preference— that  of  indirect  and  that  of  direct 
inquiry  into  the  income  subject  to  taxation. 

By  the  former,  which,  especially  in  the  past,  ob- 
tained a  wide  application,  the  income  of  the  vari- 
ous individuals  following  a  trade  is  determined  by 
a  system  of  presumptions,  taking  as  a  basis  certain 
criteria  established  by  law. 

The  principal  among  these  criteria  are  the  na- 
ture of  the  industry,  the  actual  population  of  the 
place  in  which  it  is  exercised,  the  rental  value,  the 
fixed  and  circulating  capital,  the  number  of  the 
workmen  engaged  in  the  undertaking,  etc.  Taken 
singly,  these  criteria  have  but  little  value,  but 
some  legislative  systems  have  learned  how  to  com- 
bine them  in  such  manner  that  they  have  yielded 
relatively  satisfactory  results.  This  system,  in 
fact,  excludes  the  arbitrary  measures  and  personal 
vexations  which  are  almost  unavoidable  in  the 
plan  of  direct  inquiry,  but  it  does  not  sufficiently 
recognize  the  variableness  of  the  income,  and  by 
resorting  to  classification,  which  must  always  be 
imperfect,  it  weighs  heavily  upon  the  poorer  con- 
tributors. 

To  remove  these  defects,  some  advocate  the  sys- 
tem of  direct  inquiry  into  the  actual  income, 
which  seems  m.ore  conformable  to  the  principle  of 
proportionality,  because  it  closely  follows  the  fluc- 
tuations of  industrial  success  ;  yet  in  its  concrete 


DERIVATIVE  PUBLIC  INCOME.  9 1 

applications  (official  estimates  and  verified  declara- 
tions), it  presents  many  difficulties  and  dangers 
that  are  both  serious  and  manifest. 

Hence,  there  are  not  wanting-  instances  of  leeis- 
lative  systems  that  have  resorted  to  eclectic 
methods,  in  which  the  attempt  is  made  to  combine 
in  various  ways  the  indirect  and  direct  modes  of 
inquiry  into  the  income,  yet  almost  always  giving 
preference  to  the  former  over  the  latter,  as  it 
happens,  for  instance,  when  the  indirect  system  is 
made  to  serve  for  the  allotment  of  the  ereneral 
assessment  among  the  various  territorial  divisions 
of  the  State,  whilst  to  the  direct  system  is  assigned 
the  more  limited  task  of  determinino-  individual 
quotas. 

But  direct  taxation  of  the  income  of  ao-ricultural 
industry  still  forms  a  lively  and  ever-interesting 
topic  of  controversy.  Some  accept  it ;  others 
reject  it,  because  they  maintain  that  agricultural 
profits  have  already  been  taxed  by  the  impost  on 
the  land  ;  there  are  still  others  who  only  admit  it 
partially,  when  applied  to  profits  obtained  by  agri- 
culturists who  are  not  the  owners  of  the  soil. 

The  question,  being  to  a  great  extent  connected 
with  the  economic  problem  of  rent,  cannot  be 
solved  in  the  abstract.  In  fact,  it  must  be  evident 
that  both  the  ordinary  argument  of  repercussion, 
and  the  argument  of  special  protection  due  to  agri- 
culture, and  of  the  difficulty  of  applying  a  scheme 


92  DERIVATIVE  PUBLIC  INCOME. 

of  taxation  of  agricultural  profits  in  poor  countries, 
and  in  the  case  of  property  greatly  subdivided, 
cannot  be  regarded  as  valid,  because  too  general 
and  too  indefinite,  and  because  they  are  in  some 
respects  contrary  to  the  supreme  reasons  of  jus- 
tice, and  in  due  degree  must  yield  to  other  more 
important  economic  considerations. 

It  will,  however,  be  useful  to  ascertain  whether 
in  reality  the  land  tax  falls  effectively  on  agricul- 
tural profits,  which  has  been  gratuitously  asserted 
to  be  the  fact  by  some,  and  gratuitously  denied 
by  others.  In  other  words,  it  is  desirable  to  know 
whether  in  the  case  of  the  farm  products  subjected 
to  the  land  tax,  deduction  has  or  has  not  been 
made  of  the  farmer's  profits  ;  in  the  former  case 
the  application  of  a  special  impost  on  the  income 
of  agricultural  industry  would  be  equitable,  but  in 
the  latter  it  would  not. 

The  solution  of  these  difficulties  is  accordingly 
connected  with  the  rational  re-arrangement  of  the 
land  tax  of  which  in  some  States  there  is  urgent 
need. 


CHAPTER  IX. 

INDIRECT    IMPOSTS    ON   TRANSFERS    OF    OWNERSHIP. 

The  indirect  imposts  on  transfers  of  ownership, 
which,  like  those  on  consumption,  are  indirect  be- 
cause founded  on  secondary  and  external  manifes- 


DERIVATIVE  PUBLIC  INCOME.  93 

tations  of  the  wealth  subject  to  tax,  are  levied  on 
the  transfer  of  real  property,  and  of  certain  pro- 
ductive personal  property,  whether  made  between 
living  individuals,  or  on  the  occasion  of  death, 
and  either  upon  valuable  consideration,  or  as  a 
gift.  They  not  only  concern  transfers  of  property 
(successions,  purchases,  sales,  etc.),  but  also  those 
of  use  and  enjoyment,  especially  of  real  estate 
(leases,  etc.). 

Imposts  on  transfers  comprise — 

I  St.  Those  on  transfers  made  upon  valuable 
consideration. 

2d.   Those  on  gratuitous  transfers. 

3d.  Those  levied  on  the  property  of  institutions 
and  of  industrial  companies  in  lieu  of  a  transfer- 
tax. 

Section  i. — Imposts  on  transfers  made  upon 
valuable  consideration. 

These  imposts  on  transfers  are  levied  on  pur- 
chases and  sales,  exchanges,  leases  (especially  of 
real  estate)  and  on  loans  at  interest. 

The  ever-increasing  needs  of  the  State,  the  diffi- 
culty of  augmenting  direct  taxes  and  those  on 
consumption,  the  facility  and  economy  of  collec- 
tion when  the  contributor  has  at  hand  the  means 
of  paying,  are  reasons  which  serve  to  explain  and 
to  justify  the  very  general  prevalence  of  such  im- 
posts in  modern  times. 

Yet  the  often  excessive   proportions   which   im- 


94  DERIVATIVE  PUBLIC  INCOME. 

posts  on  transfers  upon  valuable  consideration 
have  assumed  in  certain  States  have  added  to  the 
already  formidable  number  of  their  opponents. 
The  latter  observe  that  imposts  of  this  kind  are 
contrary  to  equity,  because  they  are  levied  on 
transfers  which  are  symptoms  of  poverty  rather 
than  of  wealth  ;  and  also  because  they  look  only 
at  the  capital  value  of  the  property  transferred 
without  taking  any  account  of  the  return,  or  of  the 
debts  that  may  exist  to  diminish  it ;  and,  finally,  be- 
cause the  variation  in  the  number  of  transfers  of 
property  of  equal  value  which  take  place  in  a 
given  time  contribute  in  no  small  degree  to 
heighten  the  injustice  referred  to.  They  deplore, 
moreover,  the  vexations,  frauds,  arbitrary  acts, 
controversies  and  lawsuits  which  these  imposts  so 
easily  provoke,  and  the  injury  inflicted  upon  private 
credit,  upon  public  morality,  and  upon  the  interests 
of  the  treasury  itself. 

Hence,  when  absolute  need  compels  recourse  to 
imposts  of  this  kind,  it  will  be  necessary  in  their 
application  to  use  all  due  precautions,  in  order 
that  the  burden  may  not  prove  too  heavy,  but  may 
be  fairly  distributed  among  the  contributors.  This 
result  is  obtained  : 

I  St.  When  the  measure  of  the  impost  is  moderate. 

2d.  When  a  eraduated  scale  is  made  on  the  basis 
of  the  value  of  the  property  transferred,  and  of  the 
nature  of  the  transfers. 


DERIVATIVE   PUBLIC  INCOME.  95 

3d.  When  necessary  exemptions  are  granted  to 
persons  of  small  means. 

4th.  By  omitting  all  acts  through  which  the 
payment  may  prove  either  inconvenient  or  embar- 
rassing to  the  movement  of  property  {circola- 
zione). 

5th.  When  the  expressions  of  the  law  are  clear, 
and  the  methods  of  collection  not  too  complicated. 

6th.  When  the  penalties  imposed  upon  the  con- 
tributors are  moderate,  and  distinction  is  prop- 
erly made  between  cases  of  culpable  transgression 
and  those  of  involuntary  error  or  excusable  igno- 
rance. 

Sec.  2. — Imposts  on  gratuitous  transfci's. 

Imposts  on  gratuitous  transfers  comprise — 

1st.  Necessary  transfers  (in  case  of  death),  to 
wit,  successions,  both  testamentary  and  by  opera- 
tion of  law. 

2d.  Voluntary  transfers  (inter  vivos'),  namely, 
gifts  which,  as  is  evident,  have  a  smaller  economic 
and  fiscal  importance,  but  which  must  be  regu- 
lated by  the  principles  that  are  adopted  for  succes- 
sions. 

Against  imposts  on  gratuitous  transfers,  and 
particularly  against  those  on  successions,  objec- 
tions are  made  : 

I  St.  That  they  often  (for  example,  in  the  case 
of  succession  in  direct  line  in  families  of  moderate 
means)  fall,   not  on  an  increase,  but  rather  on  a 


96  DERIVATIVE  PUBLIC  INCOME. 

devolution  of  the  wealth,  which  does  not  bring  the 
least  ofain  to  the  heir,  who  entertained  a  reason- 
able  expectation  of  this  property,  and  who,  per- 
haps, already  enjoyed  it  while  living  with  the  de- 
ceased person,  and  since  it  frequently  happens  that 
the  inherited  patrimony  scarcely  suffices  to  fill  the 
void  left  by  the  cessation  of  the  personal  or  indus- 
trial income  which  the  deceased  person  used  to  earn. 

2d.  That  they  necessarily  diminish  the  patri- 
mony by  their  generally  high  rate,  by  the  shortness 
of  the  time  allowed  for  payment,  by  the  many  ex- 
penses with  which  the  heir  is  charged,  and  espe- 
cially by  the  absence  of  an  incentive  to  induce  the 
latter  to  restore  even  slowly  the  capital  absorbed 
by  the  impost,  which  as  a  rule  is  obtained  either  by 
partial  sales  of  the  inherited  property  or  by  loans. 
On  the  other  hand  imposts  on  income  have  the 
virtue  of  stimulating  the  tax-payer  to  obtain  a  re- 
imbursement of  the  sum  paid  to  the  exchequer  by 
renewed  labor  and  saving. 

The  advocates  of  imposts  on  successions  do  not 
omit  to  adduce  the  gravity  and  urgency  of  the 
public  needs,  and  the  almost  insuperable  difficulty 
of  providing  for  them  by  other  means  ;  they  more- 
over lay  stress  on  the  fact  that  such  imposts  do 
not  in  the  least  fetter  the  freedom  of  industry, 
and  do  not  produce  any  disturbing  repercussion. 
To  the  arguments  of  its  opponents  they  present 
the  following  reply  : 


DERIVATIVE  PUBLIC  INCOME.  97 

1st.  That  in  the  cases  of  succession  in  direct 
line  only  a  very  mild  impost  is  reasonably  admissi- 
ble, from  which,  further,  the  property  should  be 
exempted  in  cases  where  it  is  too  small  to  bear  the 
burden. 

2d.  That  except  upon  the  hypothesis,  which  is 
quite  unjustifiable,  of  an  excessive  impost  required 
to  be  paid  without  the  necessary  delay,  it  cannot 
be  absolutely  maintained  that  the  impost  on  suc- 
cessions need  diminish  the  patrimony  of  the  heir, 
because  the  possibility  of  replacing  the  capital  paid 
to  the  exchequer  depends  on  the  intellectual  and 
moral  qualities,  the  means  and  methods  of  the 
heir,  and  not  on  the  character  of  the  impost. 

These  arguments  seem  sufficient  to  justify  the 
impost  when  its  amount  is  moderate,  fairly  dis- 
tributed, founded  on  laws  that  are  clearly  ex- 
pressed, and  applied  by  means  of  ascertainment 
and  of  collection  that  are  efficacious  without  being; 
vexatious. 

In  respect  of  the  criteria  of  assessment,  it  seems 
necessary  to  abandon  the  once  common  distinction 
between  successions  by  will  and  by  operation  of 
law,  as  well  as  between  personal  and  real  property, 
and  to  adopt  instead  the  principle  of  the  propor- 
tional taxation  of  the  inheritable  estate  (exclusive 
of  debts),  yet  with  a  different  rate  according  to 
the  nearer  or  niore  distant  relationship  of  the  heir 
to  the  deceased  person.  Thus,  for  instance,  suc- 
5 


98  DERIVATIVE  PUBLIC  INCOME. 

cessions  between  collateral  branches  should  be 
subjected  to  a  heavier  impost  than  those  between 
parents  and  children,  and  the  tax  on  the  succession 
of  straneers  should  be  heavier  still. 

Sec.   3. — Imposts  m  lieu  of  transfei^-tax. 

These  imposts  (which  are  sometimes  called  com- 
plementary to  those  on  the  transfers  of  property 
already  described)  are  applied,  for  the  purposes  of 
equalization,  to  certain  property,  especially  real 
estate,  which  either  by  reason  of  the  character  of 
the  ownership,  or  for  other  reasons,  legal  or  eco- 
nomic, is  not  transferable,  or  which  could  not,  with- 
out grave  inconvenience,  be  subjected  to  imposts 
on  transfers  by  the  ordinary  methods  of  ascertain- 
ment and  collection. 

Imposts  in  lieu  of  transfer-tax  accordingly  relate 

to  : 

1st.  The  property  of  benevolent  institutions  and 
of  other  ecclesiastical  and  lay  corporations  ; 

2d.  The  property  of  industrial  and  commercial 
companies. 

To  property  in  the  first  category,  which  under 
the  political  system  of  certain  States  is  made  in- 
alienable (mortmain),  special  imposts  are  applied, 
which  are  collected  periodically  on  the  basis  of  a 
record  expressly  prepared  for  this  purpose. 

Such  imposts,  notwithstanding  the  diversity  of 
title  and  purpose,  have  therefore  the  character  and 
form  of  taxation  additional  to  the  ordinary  direct 


DERIVATIVE  PUBLIC  INCOME.  99 

imposts.  Their  amount  is  calculated  on  the  aver- 
age of  what  other  property,  the  transfer  of  which 
is  unrestricted,  pays  upon  transfer  of  title  within 
the  given  period. 

Imposts  of  this  kind  on  the  property  of  indus- 
trial and  commercial  companies  (not  to  be  con- 
founded with  the  direct  imposts  which  they  pay 
upon  their  profits*)  are  exacted  periodically  or  by 
means  of  a  proportional  duty  which  falls  on  their 
shares. 

This  is  an  expedient  adopted  for  the  purpose  of 
avoiding  the  payment  which  must  otherwise  be 
made  for  every  single  transfer  of  such  instruments 
and  which  would  prove  too  inconvenient  or  entirely 
incompatible  with  the  multiplicity  and  rapidity  of 
circulation  of  modern  fiduciary  instruments.  Such 
imposts  are  generally  exacted  by  means  of  a  stamp, 
proportional  to  the  nominal  or  real  capital  of  the 
instruments  issued  by  the  company,  and  sometimes 
also  by  means  of  annual  subscriptions  stipulated 
between  the  indebted  company  and  the  public 
treasury. 

CHAPTER  X. 

INDIRECT    TAXES    ON    CONSUMPTION. 

Indirect  taxes  on  consumption  are  levied  on  the 
expenditures  of  the  contributors,  and  are  founded 

'''  See  note  on  Taxation  of  Corporations,   p.  143. 


lOO  DERIVATIVE  PUBLIC  INCOME. 

on  the  presumption  of  their  proportionality  to 
their  respective  incomes. 

This  presumption  within  certain  Hmits  Is  reason- 
able, because  there  unquestionably  exists  a  relation 
between  wealth  and  consumption,  income  and  ex- 
penditure. But  It  still  remains  very  imperfect,  be- 
cause It  does  not  take  into  account  that  Important 
part  of  the  individual  income  which  Is  not  spent, 
but  saved  ;  whence  It  results  that  the  expenditures 
are  not  rigidly  proportional  to  the  income. 

It  is  also  to  be  observed  that  by  reason  of  the 
practical  Impossibility  of  embodying  In  acts  a  gen- 
eral and  proportional  Impost  on  all  consumption 
and  of  finding  an  article  of  consumption  that 
can  be  regarded  as  a  safe  and  exact  Indication  of 
the  total  Income  of  citizens,  resort  must  be  had 
to  the  still  more  faulty  expedient  of  the  combined 
taxation  of  various  objects  of  consumption,  form- 
ing, so  to  speak,  a  system  ;  but  this  answers  still 
less  to  the  supposed  Ideal  proportion  between  In- 
come and  expenditure,  and  presents  also  the  misfor- 
tune of  an  excessive  burden  upon  the  less  wealthy 
classes,  to  whom  accordingly  we  must  grant  by 
way  of  compensation  a  reduction,  and  sometimes 
even  a  complete  exemption,  from  other  taxes. 

Section  i. — Classification  of  imposts  on  con- 
stimption. 

In  respect  of  the  kind  of  objects  most  frequently 
taxed,  there  are  to  be   distinguished  : 


DERIVATIVE  PUBLIC  INCOME.  lOI 

1st.  Imposts  on  articles  of  food  (salt,  cereals, 
meats,  sugar,  etc.)  ; 

2d.  Imposts  on  beverages  (wine,  beer,  spirits, 
coffee,  tea,  etc.)  ; 

3d.  Imposts  on  various  objects  (tobacco,  build- 
ing materials,  fuel,  clothes,  almanacs,  playing  cards, 
etc.). 

In  respect  of  the  intensity  of  the  need  which 
these  objects  satisfy,  and  hence  the  extent  of  their 
consumption,  the  distinction  is  to  be  observed  be- 
tween : 

ist.  Imposts  on  objects  of  prime  necessity  (salt, 
cereals,  soap,  certain  combustibles  and  fabrics, 
etc.)  ; 

2d.  Imposts  upon  objects  of  general  consump- 
tion, but  not  indispensable  (tea,  coffee,  wine,  beer, 
tobacco)  ; 

3d.  Imposts  upon  objects  of  luxury  (silks,  costly 
ornaments,   carriages,  horses,  etc.). 

This  distinction  can  neither  be  precise  nor  abso- 
lute (for  every  time  or  country),  but  applies  only 
as  an  approximation. 

In  respect,  finally,  of  the  methods  of  collection 
we  distinguish  : 

1st.  Government  monopolies,  when,  in  order  to 
secure  the  imposts,  the  State  reserves  to  itself  the 
exclusive  right  of  the  production  and  sale  of  the 
taxed  objects  ; 

2d.   Imposts  on    consumption  in    a  strict   sense, 


102  DERIVATIVE  PUBLIC  INCOME. 

which   fall  on    objects  of  free  production.     These 
latter  are  subdivided  into  : 

ist.  Imposts  collected  directly  from  the  consum. 
er  (as  the  taxes  on  dwellings,  servants,  carriages, 
etc.). 

2d.  Imposts  collected  indirectly,  which  fall  on 
products  before  they  reach  the  consumer,  to  wit : 

{a)   In  the  act  of  manufacture  or  sale  ; 

ip)  During  their  circulation  within  the  State  (in- 
ternal duties,  octroi),  or  from  one  State  to  another 
(boundary  or  customs  duties). 

Generally  speaking,  and  especially  in  very  rich 
countries,  imposts  on  objects  of  general  consump- 
tion are  preferable,  by  reason  of  their  large  amount, 
because  all  classes  join  in  paying  them,  because  up 
to  a  certain  point  they  are  voluntary,  and  because 
this  is  really  a  case  of  consumption  which  increases 
with  the  increase  of  wealth ;  while,  on  the  other 
hand,  imposts  on  objects  of  luxury  that  are  some- 
times required  by  reason  of  equity  yield  but  very 
scanty  returns  ;  and  imposts  on  objects  of  prime 
necessity — which  cannot,  it  is  true,  be  wholly  dis- 
pensed with,  since  they  afford  the  readiest  means 
of  causing  the  poorer  classes  to  share  in  the  tax 
— have  still  the  defect  of  being  proportional  to 
the  need  and  not  to  the  means,  and  they  accord- 
ingly require,  by  way  of  compensation,  the  reduc- 
tion of  other  imposts  as  regards  this  class.* 

*  See  note,  Taxes  on  Consumption,  p.  150. 


DERIVATIVE  PUBLIC  INCOME.  IO3 

But,  inasmuch  as  the  good  fiscal  result  of  im- 
posts on  consumption  depends  in  great  measure 
on  knowing  how  to  find  the  proper  rate  of  taxa- 
tion, which  in  its  turn  is  relative  to  the  nature  of 
the  object,  and  the  means  of  the  consumer,  it  must 
not  be  forgotten  that  the  raising  of  the  rates  fre- 
quently produces  a  lessening  or  displacement  of 
consumption,  and  an  increase  of  smuggling,  even 
to  the  injury  of  the  treasury,  whose  revenue  di- 
minishes or  at  least  does  not  increase  in  the  ex- 
pected ratio. 

Sec.   2. — Fiscal  monopolies. 

Fiscal  monopolies  consist  in  the  exclusive  right 
of  the  manufacture  and  sale  of  certain  products, 
which  the  State  reserves  to  itself  with  a  view  of 
deriving  a  crreater  revenue  than  it  could  obtain 
from  the  same  products  if  left  to  private  industry. 
Monopolies  do  not  constitute  a  special  category  of 
imposts,  but  simply  a  method  of  collection  of  cer- 
tain imposts  on  consumption. 

To  the  objections  against  other  fiscal  industries, 
fiscal  monopolies  add  those  which  are  common  to 
all  monopolies  ;  for  which  reason  their  abolition 
should,  in  principle,  be  favored.  Still,  in  the  case 
of  certain  industries  that  are  naturally  exercised 
on  a  large  scale  and  limited  to  a  few  points  of  the 
territory,  or  that  can  be  concentrated  artificially 
within  a  limited  number  of  places,  without  a  dififi- 
cult  and    complicated    process  of    production  and 


104  DERIVATIVE   PUBLIC  INCOME. 

sale,  monopoly  becomes  economically  tolerable, 
when  there  are  other  motives,  which  counsel  us  to 
maintain  it  as  an  exceptional  case. 

Among  fiscal  monopolies  still  subsisting  in  many 
States,  the  foremost  are  those  of  salt,  tobacco,  lot- 
teries, and  other  games  of  chance,  to  which  in  the 
past  were  added  the  manufacture  of  gunpowder, 
playing-cards,  etc.,  and  at  the  present  day  that  of 
lucifer  matches,  etc. 

The  salt  monopoly,  which  is  more  or  less  com- 
plete and  absolute,  according  as  it  comprises  the 
gathering,  preparation  and  sale,  or  leaves  some  of 
these  functions  to  private  enterprise,  has  always 
had  many  opponents,  and  in  practice  is  steadily 
losing  ground  in  the  richer  countries. 

To  the  arguments  adduced  against  every  impost 
having  salt  for  its  object,  which  condemn  its  mani- 
fest inequality,  its  injurious  effect  on  the  food  of 
the  poor,  its  injury  to  agricultural  and  manufac- 
turinof  industries  in  which  salt  is  used  as  an  auxil- 
ilary  element,  there  are  added  the  capital  economic 
objections  against  all  monopolies. 

Still,  the  advocates  of  this  monopoly,  with  a 
view  to  the  urgent  needs  of  the  poorer  States,  and 
to  the  serious  difficulty  of  finding  another  yielding 
an  equal  revenue  even  at  a  low  rate,  observe  that 
the  impost  on  salt,  having  once  entered  into  the 
customs  of  the  people,  is  paid  almost  uncon- 
sciously, being  confused  with  the  price  of  an  ar- 


DERIVATIVE   PUBLIC  INCOME.  I05 

tide  of  daily  use  ;  and  they  maintain  that  the  im- 
post once  existing,  the  appHcation  of  the  monopoly 
is  very  convenient  to  the  treasury,  and  that  pro- 
vision has  been  made  for  the  accommodation  of 
industries  by  the  production  of  salt  of  inferior 
quality  and  price,  and  which  cannot  be  used  as  an 
article  of  food. 

More  generally  approved  is  the  impost  on  to- 
bacco, and  to  a  certain  extent  also  the  State  to- 
bacco monopoly,  this  being  an  article  which,  if  not 
hurtful  to  all,  is  certainly  not  indispensable,  whilst 
by  its  voluntary  consumption,  every  day  more  and 
more  spreading  among  all  classes,  it  is  fitted  to 
yield  an  abundant  revenue.  This  revenue  in- 
creases greatly  through  monopoly,  or  by  other  re- 
strictive measures  (as  for  instance,  the  prohibition 
of  cultivation,  combined  with  high  duties  on  im- 
portation) that  are  best  calculated  to  prevent 
smuggling;  this  being  unavoidable  when  industry 
is  left  free  at  home,  and  an  impost  is  laid  on  the 
soil  planted  with  tobacco,  or  on  the  manufacture, 
sale,  or  importation  of  its  products. 

The  monopoly  of  lotteries  and  other  games  of 
chance  is  generally  condemned,  and  is,  indeed, 
already  abolished  in  many  countries,  notwithstand- 
ing the  considerable,  yet  always  varying  revenue, 
which  may  be  derived  from  it.  It  obviously  pro- 
duces grave  evils  in  this,  that  it  is  based  on  the  ig- 
norance and  superstition  especially  of  the  poorer 
5* 


I06  DERIVATIVE  PUBLIC  INCOME. 

classes  ;  it  diverts  them  from  useful  work  and  hab- 
its of  thrift,  stimulates  covetousness,  and  impels  to 
idleness  and  dissipation.  This  happens  more  in 
the  great  lotteries  than  in  the  smaller  ones,  in 
which  there  is  found  a  greater  freedom  and  sim- 
plicity of  combinations,  which  are  preferable  also 
by  reason  of  the  smallness  of  the  risks,  the  fre- 
quency of  the  drawings,  and  the  greater  number 
of  lottery  offices. 

In  this  case,  however,  all  fiscal  considerations 
should  yield  to  the  supreme  reasons  of  morality,  to 
which  it  is  revolting  that  the  State,  instead  of  con- 
trolling as  far  as  possible  the  wretched  passion  of 
gambling,  should  foment  it  for  base  purposes  of 
gain. 

Sec.  3. — Imposts  on  mariufacture  arid  sale. 

Imposts  on  manufacture  and  on  sale,  which  are 
much  employed  in  some  countries,  present  serious 
difficulties  in  their  application.  In  fact  if,  on  the 
one  hand,  it  is  desirable  to  tax  products  at  a  stage 
not  too  far  removed  from  the  consumer  in  order 
to  avoid  the  trouble  and  risk  of  repercussion,  still 
it  must  happen  that  the  objects  to  be  taxed  are 
collected  together  in  great  quantities  in  the  hands 
of  the  manufacturer  or  of  the  retail  dealer. 

Imposts  on  manufactures  (also  called  excises) 
are  adapted  especially  for  objects  whose  produc- 
tion takes  place  on  a  large  scale,  and  is  naturally 
concentrated    at    a    few    points,   so  that  collection 


DERIVATIVE  PUBLIC  INCOME.  I07 

and  supervision  is  rendered  easier  and  less  annoy- 
ing ;  they  may  be  collected  either  on  the  raw  ma- 
terials, or  on  products  that  have  been  wholly  or 
partly  subjected  to  the  modifications  of  manufac- 
turing industry.  Such  are  the  imposts  on  sugar, 
beer,  brandy,  and  other  kinds  of  spirits  ;  in 
some  countries,  also,  on  the  grinding  of  cereals, 
the  slaughter  of  animals,  the  making  of  wine, 
etc. 

The  introduction  of  machines  and  certain  spe- 
cial instruments  (alcoholometers,  saccharometers, 
counters,  and  weighers)  has  facilitated  the  collec- 
tion of  these  imposts. 

Imposts  on  sales  are  generally  applied  to  objects 
which  by  their  subdivided  production  do  not  admit 
either  of  monopoly  or  of  imposts  on  their  manu- 
facture, and  which  by  the  universality,  prompti- 
tude, and  variability  of  the  consumption  and  the 
ease  of  concealment  do  not  admit  of  collection  di- 
rectly from  the  consumer.  Hence,  resort  is  had 
usually  to  a  duty  on  the  sale  (sometimes  at  retail) 
of  those  articles  especially  which  do  not  serve  as 
raw  material  and  are  sold  with  a  certain  publicity, 
and  generally  at  known  prices,  such,  for  instance, 
as  wine  and  meat.  But  waiving  all  arguments 
concerning  the  nature  of  such  articles,  these  im- 
posts are  impracticable  in  countries  where  the 
taxed  products  are  made  and  consumed  at  home, 
without  having  recource  to  intermediaries. 


I08  DERIVATIVE  PUBLIC  INCOME, 

Sec.  4. — hite7'nal  cttstoms  duties. 

Octroi  duties  (also  called  duties  on  consumption 
in  a  limited  sense)  are  imposts  levied  on  certain 
products  (usually  not  manufactured),  at  the  mo- 
ment when  they  are  introduced  into  the  towns, 
which  are  called  "  closed  "  because  they  are  fur- 
nished with  barriers  and  watched  by  fiscal  agents. 

These  imposts  are  in  many  States  one  of  the 
principal  sources  of  income  for  the  municipal  treas- 
ury, and  are  every  day  extending,  and  being  better 
arranged  in  respect  of  their  mode  of  collection.  But 
they  also  count  many  opponents,  who  have  suc- 
ceeded in  some  cases  in   obtainino-  their  abolition. 

These  maintain  that  such  imposts  restrict  com- 
mercial freedom  ;  they  adduce  as  objections  to 
them  the  annoyance  which  is  caused  to  the  in- 
habitants of  the  neighborhood  of  the  inclosed 
towns  ;  the  inequality  of  treatment  between  these 
and  the  open  towns  ;  the  heavy  expenses  of  collec- 
tion ;  the  incentive  to  smuggling  ;  the  injury  to 
certain  industries  that  are  taxed  on  their  raw  ma- 
terials ;  and  they  show  that  on  account  of  the  deaf- 
ness of  provisions  and  of  labor,  industries  are  pre- 
vented from  beinof  established  in  the  towns  which 
would  otherwise  be  their  natural  home. 

To  this,  the  advocates  of  octroi  duties  reply  that 
the  inconveniences  complained  of  can  easily  be 
reduced  to  tolerable  proportions, — even  more  so 
than    other    imposts  on  consumption.     This    may 


DERIVATIVE  PUBLIC  INCOME.  IO9 

be  brought  about  by  a  careful  selection  of  the  ar- 
ticles taxed ;  by  the  exemption  of  raw  materials 
required  by  industries  which  are  not  purely  local ; 
by  the  lowness  of  the  rates,  and  by  combining  an 
effective  supervision  with  necessary  facilities  for 
payment  ;  and  finally,  by  omitting  all  vexatious 
and  annoying  practices. 

At  all  events  it  is  inadvisable  to  abolish  an  im- 
post that  has  already  entered  into  the  usage  of 
many  countries,  at  least  until  another  has  been 
found  to  replace  it,  presenting  actually  fewer  de- 
fects, and  while  other  taxes  exist  which,  in  respect 
of  the  possibility  of  radical  reforms,  present  a  far 
stronger  title  to  be  abolished,  or  made  less  onerous. 

Sec.   5. — Cicstojus  ditties. 

Customs  duties  are  levied  on  certain  products, 
which  enter  the  State,  leave  the  State,  or  pass 
through  the  State  ;  they  are  accordingly,  divided 
into  duties  on  importation,  on  exportation,  and  on 
transit. 

These  duties,  which  sometimes  have  the  special 
economic  purpose  of  protecting  national  industry 
against  foreign  competition,  have  now  in  many 
countries  an  exclusively  fiscal  purpose,  which  latter 
is  the  only  one  we  propose  to  consider. 

Duties  on  exportation  and  on  transit  being  ex- 
ceedingly unfavorable  to  national  industry,  are  be- 
coming obsolete,  and  therefore  destitute  of  impor- 
tance. 


J  10  DERIVATIVE  PUBLIC  INCOME. 

Duties  on  importation,  on  the  other  hand,  yield 
considerable  revenue,  even  in  countries  that  have 
in  principle  adopted  the  system  of  free  trade. 

Fiscal  duties  on  importation  are  now  applied  to 
a  small  number  of  products,  capable  of  yielding  a 
large  revenue.  It  is  usual  to  admit  free  or  only 
to  tax  lightly  the  personal  effects  of  travellers,  medi- 
cines, food  products  of  prime  necessity,  especially 
cereals,  raw  materials,  and  materials  important  as 
auxiliaries  in  manufacturing,  and  the  tools  used  in 
carrying  on  the  industries  prevailing  in  the  country. 
On  the  other  hand,  it  is  customary  to  tax  heavily 
what  is  sometimes  called  colonial  produce  (tea, 
coffee,  cocoa,  drugs,  etc.),  and  certain  articles  of 
consumption  (especially  beverages),  not  matters  of 
the  first  necessity  (sugar,  wine,  spirits),  which  are 
likewise  burdened  with  internal  duties  in  some 
countries ;  also  certain  manufactured  products 
(yarns,  cloth,  etc.). 

The  tariff  or  schedule  of  duties  contains  an  enu- 
meration of  merchandise  subject  to  tax,  with  a  list 
of  the  respective  rates  of  duty. 

The  experience  of  customs  reform  in  our  day 
has  proved  that  a  few  duties  with  moderate  rates 
yield  better  returns  than  many  onerous  ones,  be- 
cause they  allow  the  cost  of  collection  to  be  re- 
duced, and  lead  to  an  increase  of  consumption,  as 
well  as  to  the  diminution  of  smuggling. 

In  respect  of  the  graduation  of  duties,  the  system 


DERIVATIVE  PUBLIC  INCOME.  HI 

of  so-called  specific  duties,  which  takes  note  of  the 
number,  measure,  and  more  frequently  of  the 
weight  of  the  several  articles,  is  being  generally 
substituted  for  the  system  of  ad  valorem  duties, 
which  are  so  called  because  based  on  the  declared 
value  of  the  goods  taxed. 

Specific  duties,  while  they  are  more  simple,  more 
readily  collected,  less  likely  to  vary  in  amount  and 
less  open  to  controversy  or  frauds,  are  open  to  cer- 
tain objections  when  applied  to  very  fine  goods, 
and  in  general  to  those  that  have  many  gradations 
of  quality  and  value  ;  but  as  a  rule,  they  are  pref- 
erable to  ad  valorem  duties,  the  boasted  equity  or 
proportionality  of  which,  is  more  apparent  than 
real,  by  reason  of  the  little  reliance  to  be  placed 
on  the  declarations  of  the  importers,  and  because 
of  the  lack  of  knowledge  on  the  part  of  fiscal  agents, 
and  by  reason  of  the  variability  of  the  value  of  the 
goods  ;  whilst  in  their  application  to  articles  that 
are  bulky  and  vary  slightly  in  quality,  ad  valorem 
duties  are  unquestionably  defective  and  vexatious. 

When  the  lists  are  simple  and  are  for  the  use 
of  the  Treasury  merely,  the  alphabetic  order  of  the 
articles  is  preferable  to  a  systematic  arrangement. 

Custom-house  procedure,  which  was  formerly 
complicated,  costly  and  vexatious,  has  by  slow  de- 
grees been  improved  in  the  common  interest  of  the 
Treasury  and  of  the  contributors.  The  object  is  to 
provide    that    the   declarations,  verifications,  pay- 


112  DERIVATIVE  PUBLIC  INCOME. 

ment,  and  supervision  shall  be  arranged  so  as  to 
attain  their  end  as  far  as  it  is  possible  to  do  so. 
The  establishment  of  entrepots,  docks,  and  bonded 
warehouses,  by  means  of  which  (the  merchandise 
being  registered)  delay  is  obtained  in  the  payment 
of  duty  until  it  is  withdrawn  for  internal  consump- 
tion, and  also  the  so-called  procedure  of  assignment 
from  one  custom-house  to  another,  as  well  as  other 
facilities  accorded  for  the  payment,  constitute  not- 
able reforms,  which  are  susceptible  of  still  further 
improvement.  The  bonded  warehouse  is  gener- 
ally taking  the  place  of  the  free  port  (free  city  or 
free  station),  which,  beside  the  advantages  already 
mentioned,  enjoys  also  the  privilege  of  forming  a 
territory  into  which  merchandise  enters  exempt 
from  all  custom-house  examination,  and  which  ac- 
cordingly very  readily  becomes  the  active  seat  of 
smupfoflincr. 

But  customs  duties,  or  rather  fiscal  duties  on 
importation,  are  by  no  means  free  from  faults. 
Among  the  defects  of  this  mode  of  taxation  may 
be  numbered  the  obstacles  which  they  put  in  the 
way  of  the  free  circulation  of  goods  ;  obstacles 
which  are  the  more  felt  by  reason  of  the  rapidity 
of  modern  means  of  transport ;  the  economic,  polit- 
ical and  moral  evils  of  smuggling  which  is  syste- 
matically practiced  on  the  frontiers  ;  and,  finally,  the 
heavy  expense  of  collection,  which  increases  in  pro- 
portion to  the  extent  and  exposure  of  the  frontiers. 


DERIVATIVE   PUBIIC  INCOME.  113 

On  the  other  hand,  we  cannot  seriously  enter- 
tain the  proposal  which  has  frequently  been  made 
for  their  complete  abolition,  because,  irrespective 
of  the  enormous  gap  which  would  be  made  in  the 
public  receipts,  we  must  bear  in  mind  that  the 
abolition  of  custom-houses  should  be  preceded  by 
that  of  almost  all  the  other  indirect  taxes  on  con- 
sumption, which  display  these  faults  in  a  higher 
deorree  than  customs  duties,  and  have  other  and 
greater  faults  of  their  own.  Hence,  even  in  the 
case  of  a  marked  reduction  of  public  expenses, 
which  could  be  followed  by  a  corresponding 
diminution  of  imposts — a  sufficiently  improbable 
assumption — it  is  certainly  not  upon  the  custom- 
houses that  the  hand  of  reform  should  first  be  laid. 

Sec.   6. — Imposts  of  immediate  collection. 

These  imposts  are  levied  directly  on  the  con- 
sumer, on  certain  material  or  immaterial  objects 
which  are  considered  as  an  indication  of  a  corre- 
sponding income. 

They  partake,  however  (to  outward  appearance), 
of  some  of  the  characteristics  of  direct  taxes,  be- 
cause the  duration  of  the  objects  to  which  they  re- 
fer enables  the  collection  to  take  place  at  fixed 
periods  and  on  the  basis  of  lists  of  names. 

They  must  not  be  confused  with  imposts  on 
property,  because,  although  they  tax  objects  that 
may  form  a  part  of  it  (dwellings,  furniture,  etc.), 
they  are  not  founded  on  property  but  on  consump- 


114  DERIVATIVE  PUBLIC  INCOME. 

tion  and  expenditure  (the  houses  of  others,  hired 
furniture,  etc.). 

The  immediate  collection  of  imposts  on  consump- 
tion is  more  rational,  more  easy,  and  more  eco- 
nomical than  the  secondary.  It  is,  however,  applica- 
ble only  to  certain  products,  the  possession  of 
which  can  easily  be  verified  either  by  reason  of  the 
nature  of  the  object,  where  it  cannot  easily  be  con- 
cealed, or  because  of  the  duration  of  use,  or  the 
slowness  of  consumption.  If  it  were  extended  to 
other  objects  that  can  easily  be  concealed  or  be 
rapidly  consumed  (food,  drink,  clothes,  etc.),  it 
would  afford  an  opportunity  for  innumerable  frauds 
which  it  would  be  impossible  to  prevent,  even  by  a 
course  of  procedure  which  would  be  an  intolerable 
annoyance. 

Hence  immediate  collection  is  usually  applied  to 
imposts  on  dwellings,  on  the  service  of  domestics, 
on  private  carriages,  horses,  dogs,  and  on  a  few 
other  objects,  the  use  of  which  is  to  be  regarded 
as  a  luxury. 

The  most  important  of  these  imposts  is  unques- 
tionably that  on  dwellings,  being  different  from 
the  direct  imposts  on  buildings,  which  taxes  the 
property  and  the  special  income  from  it  previously 
ascertained,  but  not  the  expenditure  as  a  sign  of 
the  whole  income.  This  impost,  by  reason  of  the 
form  which  it  now  most  commonly  assumes,  is  also 
called  the  impost  on  rental  value. 


DERIVATIVE   PUBLIC  INCOME.  II5 

The  impost  on  dwellings,  which  can  be  made  to 
yield  a  large  revenue  to  both  general  and  local 
government,  commends  itself  through  the  ease  of 
the  arrangements  required  for  assessment  and  for 
collection,  and  because  there  really  exists  a  rela- 
tion between  the  income  and  the  expenditure  in- 
curred on  account  of  the  dwelling.  It  is,  however, 
plain,  upon  closer  view,  that  there  is  no  lack  of 
causes  of  inequality  In  Its  operation,  such,  for  exam- 
ple, as  the  notable  diversities  in  rental  value  In 
different  centres  of  population,  and  the  multiplicity 
of  individual  and  social  circumstances  (number  of 
children,  vocation,  inclinations,  tastes,  opinions), 
on  account  of  which  expenditure  for  dwellings  fails 
to  increase  in  exact  proportion  to  the  Income  of 
the  tax-payer. 

These  evils  are  remedied,  although  only  in  part, 
by  exempting  the  smallest  house-rents  from  taxa- 
tion, and  likewise  rooms  intended  to  be  used  for 
manufacturing  ;  taking  local  differences  Into  ac- 
count by  means  of  the  classification  of  cities  and 
boroughs  according  to  population,  and  finally  by 
applying  the  tax  at  rates  Increasing  with  the  rental 
value.  When  these  expedients  are  adopted  in 
practice  the  impost  tends  to  become  less  imperfect 


Il6  DERIVATIVE   PUBLIC  INCOME, 


CHAPTER   XL 

DIRECT    IMPOSTS    ON     INCOME    AND    ON    PROPERTY     IN 

GENERAL. 

General  imposts  on  income  and  property,  by 
their  essentially  subjective  and  universal  character, 
differ  from  those  direct  imposts,  whether  objective 
or  personal,  which  have  been  hitherto  considered. 
By  some  they  are  admired  as  the  model  method  of 
taxation,  which  should  replace  all  others  ;  but  by 
others  they  are  considered  as  complementary  parts 
of  a  rational  system  of  taxation,  direct  and  in- 
direct. 

Section  i. — Gejieral  tax  on  income. 

This  impost  is  levied  on  the  total  income  of  the 
contributors,  irrespective  of  its  nature  or  of  its 
source  ;  hence  the  income  from  personal  and  real 
property,  from  property  which  is  perpetual,  fixed, 
certain,  and  from  that  which  is  temporary,  vari- 
able and  uncertain. 

The  adherents  of  this  impost  recommend  it — 

1st.  From  the  legal  standpoint,  as  universal, 
easily  graduated,  capable  of  reaching  certain  in- 
comes (as  the  public  funds)  that  escape  special  im- 
posts; necessary  exemxption  of  the  smallest  in- 
comes,  thus  constituting  altogether   the   simplest 


DERIVATIVE   PUBLIC  INCOME.  W] 

and  fairest  method  of  requiring  the  citizens  to  ful- 
fill their  obligations  to  the  public  treasury. 

2d.  From  the  economic  standpoint  as  an  impost 
which,  better  than  any  other,  can  adjust  itself  to  the 
continuing  fluctuations  of  wealth  without  produc- 
ing any  injurious  repercussion  and  without  re- 
straining industrial  freedom,  which  is  the  case  with 
imposts  on  consumption. 

3d.  From  the  political  standpoint  as  the  most 
natural,  most  direct  and  least  costly  of  all  imposts. 

The  adversaries  of  this  form  of  taxation  oppose 
it — 

1st.  In  its  legal  aspect,  because  once  given  the 
existence  of  a  good  system  of  special  imposts,  the 
general  impost  on  income  becomes  merely  an  un- 
just repetition  ;  because  the  exemption  of  the 
smaller  incomes  leads  to  the  progressive  taxation 
of  the  greater  ;  because  finally  the  direct  contact 
of  the  tax-payers  with  the  collecting  officers,  and 
the  publicity  given  to  the  economic  condition  of 
the  former,  suppose  such  a  condition  of  knowledge, 
morality,  and  disinterestedness  as  can  hardly  be 
found  in  actual  life  ; 

2d.  In  its  economic  aspect,  because  its  boasted 
adaptability,  which  after  all  belongs  also  to  direct 
special  imposts,  implies  the  existence  of  safe 
methods  for  ascertaining  not  merely  the  measure 
of  reduction,  but  also  of  increase,  in  the  various 
parts  of  the  wealth  subjected  to  taxation  ;  because 


Il8  DERIVATIVE  PUBLIC  INCOME. 

freedom  of  industry  can  be  respected  also  by  direct 
special  imposts ;  and  finally,  because  the  appre- 
hended repercussion  would  not  fail  to  take  place  if 
what  is  superfluous  be  taxed  in  equal  measure  with 
what  is  necessary  ; 

3d.  In  its  political  aspect,  because  the  simplicity 
of  the  provisions  required  for  imposing  the  tax  is  in 
contrast  with  the  variety  of  the  sources  of  income, 
which  should  be  treated  upon  different  methods  ; 
and  because  the  cheapness  of  collection  is  offset  by 
the  inconvenience  to  the  treasury  of  payment  by 
small  installments,  and  the  risks  of  ascertainment, 
which  afford  too  much  opportunity  for  arbitrary 
and  vexatious  proceedings,  and  for  fraud. 

By  these  various  arguments  the  general  income 
tax  is  either  absolutely  rejected  or  is  allowed  only 
in  case  of  extraordinary  and  urgent  needs,  in  which 
the  consideration  of  certainty  and  speedlness  of 
payment  prevails  over  every  other  reason,  espe- 
cially In  view  of  the  many  difficulties  which  In  such 
circumstances  stand  In  the  way  of  an  Increase  of 
the  other  direct  or  Indirect  imposts. 

Yet  the  problem  cannot  be  solved  practically  by 
keeping  In  view  only  the  advantages  or  disadvan- 
tages of  the  income  tax.  We  must  also  consider 
the  necessity  of  Its  application  concurrently  with 
other  modes  of  taxation,  and  It  is  equally  necessary 
that  intellectual  and  mora}  culture,  political  and 
social  circumstances,  should  help  to  spread  the  con- 


J 


DERIVATIVE  PUBLIC  INCOME.  IIQ 

viction  of  the  usefulness  of  the  income  tax,  and  of 
the  duty  of  all  to  pay  it. 

If  such  conditions  are  realized  in  sufficing  meas- 
ure, an  income  tax  may  be  imposed  at  a  low  rate, 
even  in  ordinary  times,  in  order  to  fill  certain  gaps, 
and  to  compensate  certain  disproportions  in  the 
special  imposts.  On  the  other  hand,  in  case  of  ex- 
traordinary needs  the  rate  may  be  raised,  in  order, 
if  possible,  to  avoid  loans  and  the  increase  of  other  • 
taxes  slower  in  their  operation  or  less  safely  col- 
lected. 

In  the  application  of  such  an  impost,  beside  the 
problems  of  graduation  of  exemption  of  the  smaller 
incomes,  and  of  the  best  mode  of  collection,  of 
which  we  have  already  treated  in  speaking  of  im- 
posts in  general,  and  of  other  direct  imposts  in  par- 
ticular, serious  difficulties  present  themselves  con- 


cernmg  : 


1st.  Taxation  of  the  different  sources  of  income, 
as  a  whole,  or  under  separate  heads. 

2d.  Discrimination  between,  or  the  equal  treat- 
ment of,  incomes  of  like  amount,  but  of  different 
origin  and  duration. 

In  respect  of  the  former  question,  we  observe  of 
the  special  taxation  of  single  incomes  at  their 
source,  namely,  in  the  hands  of  those  who  earn 
them  (as  the  tenant,  the  manufacturer),  without 
considering  into  whose  i^..;'ds  they  may  fall,  and  in 
what    manner    they  are    subsequently    distributed. 


I20  DERIVATIVE  PUBLIC  INCOME, 

that  if  on  the  one  hand  it  may  seem  to  disturb  the 
unity  and  simpHcity  of  the  collection,  on  the  other 
hand  it  corresponds  better  with  the  essentially 
varying  nature  of  the  several  kinds  of  income  and 
to  the  exigencies  of  practical  life,  which  require 
that  methods  of  collection  should  be  modified  ac- 
cording to  the  nature  of  individual  cases,  and  do 
not  authorize  the  abandonment  of  the  safer  methods 
(as  for  example,  the  method  of  retention),  for  the 
mere  reason  that  they  cannot  be  applied  to  all  in- 
comes. Nor  should  it  be  forgotten  that,  by  the 
method  of  special  taxation,  many  frauds  are  avoided, 
and,  moreover,  secrecy  is  observed  as  to  the  eco- 
nomic condition  of  the  contributors. 

Far  more  difficult  is  the  question  concerning  the 
application  of  equal  or  varying  rates  to  incomes, 
which  differ  in  their  origin  (incomes  from  labor,  or 
from  capital,  or  mixed  incomes),  or  as  to  their  dura- 
tion, perpetual  or  temporary,  and  the  latter  either 
certain  or  uncertain. 

The  advocates  of  the  system  of  the  so-called  dis- 
crimination of  such  incomes  maintain  that  in  order 
to  apply  the  impost  equitably  to  them,  we  should 
take  into  account  the  foregoing  differences  ;  and 
they  thereupon  propose  various  expedients  in  order 
to  reduce  the  total  income  to  a  taxable  income,  so 
that  the  burden  of  the  impost  may  actually  be  pro- 
portional to  the  real  condition  of  the  single  con- 
tributors. 


DERIVATIVE  PUBLIC  INCOME.  121 

In  support  of  the  system  of  discrimination,  it  is 
particularly  to  be  observed  that  it  has  nothing  in 
common  with  that  of  progressive  taxation,  because 
the  latter  requires  the  application  of  a  rate  differing 
as  regards  the  amount  of  income,  whilst  the  former 
predicates  the  need  of  different  treatment  of  incomes 
on  account  of  their  different  character  or  deriva- 
tion. In  addition  to  this,  it  would  be  unjust  to  tax 
in  equal  measure  incomes  that  are  different  as  to 
their  origin,  duration  and  certainty  ;  the  tempo- 
rary incomes  should,  on  the  contrary,  be  equalized 
with  the  permanent  ones,  by  capitalizing  them  for 
the  purpose  of  comparison.  It  is  to  be  observed, 
lastly,  that  account  should  also  be  taken  of  the 
smaller  need  for  saving,  which  the  recipients  of  in- 
comes derived  from  capital  have  in  comparison 
with  those  who  only  live  by  the  produce  of  their 
labor.  The  latter,  in  order  not  to  fall  sooner  or 
later  into  distress,  must  provide  for  the  possible 
event  of  illness,  slackness  of  work,  or  incapacity 
for  work,  by  saving  a  considerable  part  of  their  in- 
come. 

On  the  other  hand,  the  advocates  of  the  equal 
treatment  of  incomes  see  in  the  system  of  their 
adversaries  a  tendency  of  hostility  toward  capital, 
and  an  erroneous  idea  of  taxation.  In  their  opin- 
ion, taxation  should  not  alter  the  natural  distribu- 
tion of  wealth  ;  and  they  maintain  especially  that 
there    is    no    difference    between    permanent    and 


122  DERIVATIVE  PUBLIC  INCOME. 

temporary  Incomes,  so  far  as  the  tax  is  concerned, 
because  if  the  impost  is  permanent  for  the  one,  it 
is  temporary  for  the  other,  and  to  capitaHze  the  in- 
come without  also  capitaHzing  the  impost  in  the 
same  sense,  reduces  itself  to  an  arithmetical  soph- 
ism. They  also  lay  stress  on  the  fact  that  the  in- 
come of  capital  frequently  embraces  a  charge  for 
replacement,  which  the  adherents  of  discrimination 
should  take  into  account.  They  observe,  finally, 
that  the  latter  method  is  exposed  to  insurmountable 
difficulties  in  its  application ;  that  it  inevitably 
proves  arbitrary,  because  it  lacks  a  safe  rule  for  the 
reduction  of  the  total  income  into  taxable  income, 
as  is  proved  by  the  never-ending  controversies 
among  the  advocates  of  discrimination. 

Sec.  2. — General  impost  07i  the  entire  estate  of  the 
tax-payer. 

This  impost  has  for  basis  not  the  income  by  it- 
self, but  the  material  sources  from  which  it  is  de- 
rived, to  wit,  the  possessions,  the  substance,  the 
property  (such  as  lands,  mines,  quarries,  buildings, 
machines,  and  implements,  merchandise,  money, 
furniture  and  domestic  utensils,  etc.). 

This  impost  on  property  has  many  points  of 
analogy  with  that  on  income  ;  it  accordingly  par- 
takes of  many  of  the  defects  and  advantages  of  the 
latter,  and  it  likewise  has  the  tendency  to  tax  indi- 
viduals with  reference  to  their  economic  condition 
considered  in  its  totality  (the  debts  having  been 


DERIVATIVE  PUBLIC  INCOME.  123 

of  course  deducted),  that  is,  after  an  exact  verifica- 
tion of  the  property  subject  to  taxation. 

Yet  this  impost  on  property  differs  from  that  on 
income,  because, 

1st.  It  taxes  also  the  unproductive  part  of  the 
property  (as  parks,  furniture,  books,  pictures,  etc.), 
which  is  exempt  from  the  tax  on  income. 

2d.  It  taxes  at  equal  rates,  properties  that  yield 
different  incomes  if  they  happen  to  have  the  same 
capital  value. 

3d.  It  spares  personal  earnings  altogether. 

These  differences  between  the  two  imposts  exist, 
however,  only  when  they  conform  to  their  ideal 
type.  In  practice  they  are  often  less,  because  in 
the  case  of  the  income  tax  the  burden  is  often  ap- 
plied to  unproductive  property,  which  is  considered 
as  producing  a  latent  revenue  (saving  of  expense), 
or  as  capable  of  yielding  a  future  income,  and  on 
the  other  hand,  in  the  impost  on  the  entire  prop- 
erty, personal  income  is  sometimes  taxed  by  capi- 
talizing it. 

The  advocates  of  the  system  of  general  imposts 
on  the  entire  property,  who  are  somewhat  less 
numerous  than  those  of  the  system  of  general  im- 
posts on  income,  extol  it  as  possessing  a  more  cer- 
tain, stable,  and  evident  basis  ;  they  maintain  that  it 
is  less  exposed  to  frauds,  because  it  avoids  the 
almost  insuperable  difficulty  of  a  precise  ascertain- 
ment of  incomes.     They  further  praise  its  beneficial 


124  DERIVATIVE  PUBLIC  INCOME. 

influence  upon  labor  and  the  impulse  which  it  may 
impart  to  the  conversion  of  unproductive  into  pro- 
ductive property,  and  the  consequent  repression  of 
waste  and  luxury. 

The  opponents  of  the  general  impost  on  prop- 
erty do  not  acknowledge  either  its  safety,  its  sta- 
bility, or  its  simplicity  of  collection  ;  they  observe 
that  the  physical  evidence  of  the  taxable  material 
should  not  be  confounded  with  the  economic  evi- 
dence of  its  value,  that  this  impost  presents  no  less 
difificulties  of  ascertainment  than  those  relating  to 
income,  but  in  some  cases  even  greater  ones,  as 
for  instance  those  appertaining  to  the  assessment 
of  personal  property  possessed  by  individuals. 
They  further  declare  that  the  parity  of  treatment 
of  productive  and  unproductive  property  is  in  itself 
unjust ;  while  under  any  circumstances  the  forced 
conversion  of  unproductive  property  into  produc- 
tive would  either  be  illusory  or  unjust,  tyrannical 
and  disturbing.  They  say,  finally,  that  the  exemp- 
tion of  personal  earnings  is  unjust,  because  this 
fiscal  privilege,  which  is  not  always  advantageous 
to  the  poorer  classes,  would  discourage  saving,  and 
prevent  that  increase  of  capital  at  which  the  system 
especially  aims. 

It  seems,  therefore,  that  imposts  on  the  entire 
property,  offering  as  they  do  but  few  advantages, 
and  all  the  disadvantages  of  imposts  on  income, 
are  of  inferior  merit  to  the  latter  by  reason  of  their 


DERIVATIVE   PUBLIC  INCOME.  ^25 

special  and  very  serious  defects  from  a  legal  point 
of  view  ;  and  hence  should  never  be  applied  except 
in  case  of  extraordinary  need,  and  with  due  pre- 
cautions, tending  to  compensate  their  deficiencies 
(in  respect  of  personal  earnings),  and  moderating 
their  rigor  by  ample  exemptions,  which  sometimes 
(as  in  the  case  of  household  effects)  are  required 
by  the  methods  of  collection.  A  rational  combi- 
nation of  the  two  systems  of  taxation  is  not,  how- 
ever, impossible.  Some  propose,  for  example, 
that  the  poorer  classes  should  pay  a  tax  on  income 
only,  but  at  a  higher  rate,  while  the  richer  should 
pay  in  addition  a  tax  on  property,  which  is  easier 
to  establish,  more  equal  and  exact  for  the  determi- 
nation of  the  taxable  amount,  and  which,  with  re- 
gard to  economic  conditions,  takes  into  account 
the  personal  element  as  well  as  that  of  real  estate. 
For  the  success  of  such  a  system,  however,  it  is 
indispensable  to  have  a  good  political  and  fiscal 
administration,  conscientious,  educated  and  zealous 
officials,  and  moral  and  enlightened  tax-payers.'^* 


CHAPTER    XII. 

COMPARISON    OF    DIRECT    WITH    INDIRECT    TAXES. 

In  favor  of  direct  taxes  is  adduced  : 

I  St.   The  certainty  of  their  product  in  ordinary 

*  See  Note  on  Taxation  of  Personal  Property,  p.  139. 


126  DERIVATIVE  PUBLIC  INCOME. 

times,  and  the  great  probability  that  in  abnormal 
times  the  proportional  increase  of  the  revenue  will 
correspond  to  the  increase  of  the  rates  ; 

2d.  The  economy  and  ease  of  collection,  the 
simplicity  of  superintendence,  and  the  smaller 
number  of  controversies  ; 

3d.  The  greater  possibility  of  farming  them  out 
on  contract,  to  the  local  governments  or  to  private 
individuals,  without  incurring  any  considerable  risk  ; 

4th.  The  encouragement  to  production  which 
results  from  the  fixed  or  less  variable  character  of 
such  imposts,  and  in  particular  of  certain  forms  of 
the  same  ; 

5th.  The  greater  openness  and  publicity  of  a  sys- 
tem which  does  not  depend  upon  the  verification 
of  certain  facts,  constituting  more  or  less  uncertain 
indications  of  wealth,  but  which  taxes  it  directly, 
and  at  fixed  periods  calls  for  a  definite  proportion 
of  the  wealth  itself. 

Against  direct  taxes  may  be  adduced  : 

ist.  The  insufficiency  of  their  total  product  in 
comparison  with  the  needs  of  modern  budgets ; 

2d.  The  trouble  which  is  caused  especially  to 
the  smaller  contributors  by  being  inexorably  re- 
quired to  pay,  at  fixed  epochs,  relatively  large 
sums  of  money  ; 

3d.  The  injustice  of  a  fixed  payment  at  the  be- 
ginning of  a  fiscal  period,  notwithstanding  the 
eventual  shrinkage  of  the  property  taxed ; 


DERIVATIVE  PUBLIC  INCOME.  12/ 

4th.  The  danger  resulting  from  immediate  con- 
tact with  fiscal  agents  in  which  many  contributors 
are  placed,  who  do  not  appreciate  the  equitable- 
ness  of  the  charge  or  the  usefulness  of  the  purpose 
for  which  the  impost  is  levied. 

In  favor  of  indirect  taxes  may  be  mentioned  : 

I  St.  Their  very  great  elasticity,  which  produces 
a  natural  equilibrium  with  every  movement  of 
wealth  ; 

2d.  Their  considerable  product,  being  capable 
of  taxing  the  smaller  fortunes,  as  in  justice  they 
should  do,  to  which  direct  taxes,  with  their  too 
rigid  methods  of  exaction,  are  scarcely  applicable  ; 

3d.  Their  almost  imperceptible,  or  at  least  very 
light  burden,  the  payment  being  often  voluntary, 
and  as  it  were  mingled  with  the  prices  of  the  ar- 
ticles taxed,  which,  as  a  rule,  are  freely  purchased. 

Against  indirect  taxes  may  be  adduced  : 

1st.  Their  great  disproportion  to  the  means  of 
the  contributors,  notwithstanding  the  apparent 
proportion  as  gauged  by  certain  criteria,  which  are, 
however,  a  very  imperfect  indication. 

2d.  The  uncertainty  of  the  proceeds  and  the 
slight  prospect  of  an  increase  corresponding  with 
the  raising  of  the  rates  in  the  case  of  extraordinary 
needs ; 

3d.  The  expensive,  difficult  and  vexatious  mode 
of  collection,  which  leads  to  many  frauds  and  very 
serious  controversies ; 


128  DERIVATIVE  PUBLIC  IMCOME. 

4th.  The  greater  oppression  of  the  poorer  classes, 
however  much  it  may  be  sought  to  exempt  neces- 
saries and  to  bear  heavily  on  luxuries. 

By  weighing  these  arguments  and  having  regard 
to  practical  exigencies,  we  may  conclude  that 
neither  of  the  two  types  is  perfect  ;  that,  although 
in  the  abstract  direct  imposts  (always  presuppos- 
ing a  satisfactory  arrangement  of  them)  correspond 
better  to  the  general  canons  of  taxation,  still  it  be- 
comes necessary  to  resort  to  the  indirect,  in  order 
to  fill  the  void  left  through  the  operation  of  direct 
taxes,  and  to  remedy  some  of  their  defects  ;  and, 
finally,  that  we  ought  to  establish  a  just  balance 
between  them,  in  such  manner,  however,  that  any 
further  tax  reforms  may  be  turned  in  the  direction 
of  establishing  a  duly  perfected  system  of  direct 
imposts,  as  being  the  principal  basis  of  a  true  sys- 
tem of  finance. 


CHAPTER  XIII. 

COMPARISON     BETWEEN    THE    MULTIPLE    TAX     SYSTEM 
AND    THE    SINGLE    TAX    SYSTEM. 

The  majority  of  writers,  in  accord  with  the  uni- 
form practice  of  civilized  States,  hold  a  well-regu- 
lated and  complex  system  of  varied  imposts  to  be 
necessary,  as  avoiding  the  danger  of  a  unity  which 
is  defective   or   only  apparent,  and   providing  im- 


DERIVATIVE   PUBLIC  INCOME.  1 29 

posts  graduated  according  to  the  diverse  nature  of 
the  articles  taxed,  and  thus  attaining  the  purpose 
of  giving  them  the  necessary  range  and  flexibiHty, 
and  of  derivine  from  them  all  that  is  needed  for 
public  wants,  and  by  means  of  their  variety  render- 
ing the  burden  less  oppressive  to  the  tax-payer. 

Still,  in  the  past  there  have  been  many,  and  at 
present  there  are  not  wanting  some,  who,  taking  an 
ideal  view,  and  cherishing  the  belief  that  a  consider- 
able reduction  of  public  expenses  is  possible,  main- 
tain that  we  should  substitute  a  rational  and  pro- 
gressive single  impost  system  for  the  empirical  one 
of  multiplied  imposts. 

They  observe  that  the  single  impost,  and  it 
alone,  is  perfectly  just,  because  it  asks  the  contrib- 
utor once  for  all  for  that  proportional  share  of  his 
means  which  is  necessary  for  the  needs  of  civil 
society;  that  in  this  manner  the  restrictions  on  the 
production,  circulation  and  consumption  of  wealth 
are  reduced  to  a  minimum,  while  in  the  case  of 
multiplied  imposts  these  restrictions  are  almost 
insupportable  ;  that,  finally,  by  means  of  a  single 
impost  we  obtain  the  greatest  simplicity  and  econ- 
omy in  the  mode  of  collection,  because  we  lessen 
the  amount  of  book-keeping  and  superintendence, 
and  the  staff  of  officials  is  reduced,  with  great  ad- 
vantage both  to  the  exchequer  and  to  the  citizens. 

But  when  they  come  to  the  application  of  their 
idea,  the  advocates  of  the  single-impost  system  are 

6* 


I30  DERIVATIVE  PUBLIC  INCOME. 

not  at  all  agreed.  Some,  who  share  an  opinion 
notably  entertained  in  the  past,  desire  that  the  im- 
post should  fall  on  the  rent  of  land,  while  others 
prefer  to  tax  consumption  ;  others,  the  entire  prop- 
erty ;  others,  and  they  are  the  majority,  prefer  to 
tax  income. 

The  single  impost  on  landed  revenue  was  at  one 
time  advocated  as  a  consequence  of  the  supposed 
exclusive  productiveness  of  the  soil,  and  therefore 
of  the  incidence  of  every  impost  on  the  net  prod- 
uce derived  therefrom  ;  others  sought  to  justify  it 
by  adducing  a  supposed  repercussion  of  the  impost 
on  the  consumers  of  agricultural  produce.  To  an- 
swer these  arguments,  it  is  enough  to  observe  that 
modern  science  has  fully  exposed  the  error  of  these 
premises  by  demonstrating  that  such  an  impost 
would  ruin  the  landed  interest,  and  would  accord 
an  unjustifiable  privilege  to  the  other  social  classes, 
without  even  yielding  sufficient  revenue  for  the 
present  wants  of  political  societies. 

The  systems  of  single  impost  on  consumption,  or 
on  the  entire  propety,  would  be  equally  unjust  and 
impracticable.  The  former  takes  no  notice  of  the 
considerable  part  of  wealth  which  is  saved  and  put 
aside  in  varying  proportions  by  individuals,  it  be- 
ing furthermore  quite  impossible  by  means  of  this 
system  to  tax  all  kinds  of  consumption,  or  to  find 
any  that  have  even  a  sufficiently  close  correspond- 
ence with  individual  incomes  ;  the    latter   system 


DERIVATIVE  PUBIIC    INCOME.  13 1 

adds  to  the  defects  which  it  has  in  common  with 
the  single  impost  generally,  as  has  already  been 
seen,  faults  of  its  own,  which  tend  to  render  it  in 
the  hio-hest  deofree  defective. 

Most  of  the  advocates  of  a  single  impost  at  the 
present  day  contend  for  the  tax  on  income.  Even 
in  case  it  be  admitted  that,  given  the  practicabil- 
ity of  a  single-impost  system,  that  upon  income 
answers  better  than  any  other  to  the  ideal  of  a 
system  of  taxation,  it  must  not  be  forgotten  that 
its  perfection  rests  upon  the  hypothesis  of  a  suffi- 
cient knowledge  of  individual  incomes;  while,  on 
the  other  hand,  the  inequality  of  the  assessment — 
an  unavoidable  consequence  of  defective  systems 
of  ascertainment — would  in  the  case  of  a  sinofle  im- 
post  assume  such  proportions  as  to  render  its  ex- 
ecution far  from  desirable. 

To  conclude  this  comparison  of  the  two  systems 
of  single  and  multiple  impost,  it  is  to  be  observed : 

I  St.  That  supposing  a  concatenation  of  circum- 
stances throuo:h  which  at  the  same  time  we  should 
be  enabled  to  obtain  a  very  great  reduction  of 
public  expenses,  and  also  to  know  with  sufficient 
exactness  the  relative  amount  of  wealth  of  the 
contributors,  in  such  case  a  single  impost  (with  the 
reservation,  however,  of  certain  fees,  for  the  re- 
muneration of  special  services  rendered  to  the  citi- 
zen), would  seem  to  answer  to  the  ideal  of  a  sys- 
tem of  taxation. 


132  DERIVATIVE  PUBLIC  INCOME. 

2d.  That,  as  the  facts  stand,  present  poHtical  and 
social  conditions  render  a  single  impost  impracti- 
cable. In  most  States,  the  necessity  of  keeping  up 
an  armament,  and  the  vastness  of  the  public  debt, 
prevent  any  considerable  reduction  of  outlay  ;  nor 
are  honesty,  patriotism,  intelligence,  culture,  the 
spirit  of  order  and  economy,  sufficiently  diffused 
among  the  multitude  of  tax-payers  to  inspire  them 
with  the  candor  and  self-denial  which  are  the  neces- 
sary basis  of  a  system  which,  laying  its  tax  in  only 
one  way  and  under  one  head,  must  needs  rely  on 
the  punctual  payment  of  very  considerable  sums. 
It  is  therefore  necessary  to  resort  to  multiple  im- 
posts, seeking  to  arrange  and  reform  them  in  such 
manner  as  to  substitute  the  most  simple  and  ra- 
tional combination  possible  in  the  place  of  com- 
plexity and  disorder. 

3d.  That  a  single-tax  system,  though  it  cannot 
be  established  under  the  present  conditions  of  civili- 
zation, is  not  altogether  devoid  of  either  theoreti- 
cal or  practical  value.  It  in  fact  constitutes  an 
ideal  which,  perhaps,  may  never  be  attained,  but 
which  for  all  that  should  not  be  forgotten,  although 
the  optimist,  who  believes  that  all  ideals  should  be 
put  in  practice,  is  not  less  to  be  blamed  than  the 
empiric,  who  absolutely  contemns  them  all. 


DERIVATIVE  PUBLIC  INCOME.  1 33 


CHAPTER    XIV. 

LOCAL    TAXES. 

Municipalities  and  provinces,  In  order  to  pro- 
vide for  their  needs,  incur  obligatory  expenses,  and 
expenses  imposed  by  their  own  will.  The  former 
meet  obligations  of  general  interest  imposed  upon 
them  by  the  State  for  reasons  of  decentralization, 
and  for  the  relief  of  its  own  finances  ;  the  latter  re- 
late to  objects  of  local  concern.  The  kind  and 
amount  of  the  voluntary  expenses  are  determined 
by  the  local  authorities,  with  the  co-operation  of 
their  own  deliberative  assemblies,  within  certain 
limits  fixed  by  the  State,  and  varied  according  to 
the  rule  of  the  greater  or  lesser  autonomy  granted 
to  the  minor  political  societies. 

Although  the  receipts  of  municipalities  and  prov- 
inces (ordinary  and  extraordinary,  original  and 
derivative,)  are  governed  fundamentally  by  the 
same  principles  which  obtain  for  the  State,  it  may 
prove  useful  to  indicate  in  general  certain  rules 
concerning  local  imposts,  which  are  the  most  im- 
portant among  their  ordinary  receipts. 

Local  taxes  are  either  called  additional  to  those 
imposed  by  the  State  or  entirely  different  from 
those.     The  latter  answer   correctly  to   the  prin- 


134  DERIVATIVE  PUBLIC  INCOME. 

ciple  of  autonomy  which  in  free  States  is  enjoyed 
by  minor  poHtical  bodies,  and  also  to  the  special 
nature  of  the  expenses  incurred  by  the  local  au- 
thorities, and  especially  by  those  of  municipali- 
ties. The  latter,  in  fact,  may  be  said  to  constitute 
associations  rather  than  States  on  a  small  scale, 
being  based  on  a  joining  of  interests,  mostly  of  an 
economic  character,  which  necessarily  leads  to  some 
modification  of  the  rules  relating  to  the  assessment 
of  their  taxes. 

In  fact,  it  must  be  evident  that  the  special  advan- 
tages which  landed  property  derives  from  munic- 
ipal institutions  justify  the  existence  of  distinct 
imposts  on  the  property  itself  in  addition  to  other 
local  taxes  which  are  levied  on  wealth  in  general. 
On  the  other  hand,  the  increased  influence  of  the 
lower  classes  in  the  administration  should  equitably 
be  balanced  by  an  increase  of  their  relative  bur- 
dens, which  can  be  obtained  by  means  of  suitable 
imposts  on  consumption,  arranged  in  a  manner  not 
to  cause  too  great  disturbance  of  the  national  pro- 
duction and  circulation. 

The  advocates  of  imposts  additional  to  those  of 
the  State  (surtaxes)  lay  stress  on  the  ease  of  ascer- 
tainment, and  economy  of  collection,  and  they 
plead  the  inconvenience  of  radical  changes  in  sys- 
tems which  in  many  countries  have  been  sanctioned 
by  the  custom  of  ages.  On  the  other  hand,  the 
advocates  of  purely  local  imposts  observe  that  these 


DERIVATIVE   PUBLIC  IS' COME.  135 

facilities  encourage  a  tendency  to  extravagance  ; 
that  in  the  confusion  of  local  with  general  imposts 
they  deprive  the  tax-payers  of  the  distinct  and  ex- 
act knowledge  of  the  sacrifices  which  they  must 
make,  and  that  they  accordingly  lessen  the  chance 
of  an  efficient  control  over  the  local  budget. 

Financial  reform  of  the  provinces  and  municipal- 
ities, which  above  all  supposes  the  execution  of 
corresponding  administrative  reforms,  the  reduc- 
tion of  public  expenses,  and  the  exertion  on  the 
part  of  the  State  of  a  controlling  power,  vigorous, 
but  entirely  compatible  with  local  freedom,  must 
at  the  same  time  be  consonant  with  national  tradi- 
tions, and  must  also  take  into  account  the  notable 
difference  that  exists  between  the  economic  condi- 
tion of  cities  and  that  of  villages. 

A  good  system  of  municipal  taxation  may  be 
constituted  by  a  special  impost  (in  urban  communi- 
ties on  dwellings,  in  rural  communities  on  fami- 
lies)  ;  by  an  additional  percentage  to  the  land-tax 
of  the  State,  and  by  imposts  on  articles  of  general 
domestic  consumption,  with  the  eventual  final  ad- 
dition of  some  other  imposts  on  the  consumption 
of  articles  of  luxury. 


TAXATION  OF  MORTGAGES. 


Taxation  of  mortgaged  land  without  deduction  of  the  amount  of  the 
mortgage,  and  taxation  of  the  mortgage  also,  are  a  crying  evil  in  the  fiscal 
systems  of  American  States.  There  is  great  contrariety  of  legislation 
and  of  judicial  decision  on  this  subject,  and  nothing  in  the  whole  range  of 
fiscal  practice  has  given  rise  to  more  bitter  and  heated  controversy.  The 
origin  of  this  double  taxation  may  be  easily  traced.  Owing  to  the  difficulty 
of  finding  and  taxing  personal  property,  and  especially  "  moneyed  capital  " 
in  its  modern  forms,  it  is  necessary  that  landed  property  should  supply  the 
largest  share  of  the  revenue  for  local  purposes.  Revenue  must  be  had  some- 
how, and  accordingly  the  law  lays  its  hand  first  upon  whatever  is  immovable, 
and  makes  the  tax  the  paramount  lien  upon  it.  To  allow  deduction  for 
mortgages  is  to  authorize  a  lien  paramount  to  the  tax,  which  may  swallow 
the  entire  revenue  and  leave  the  State  empty-handed.  To  forbid  this  is 
philosophical,  and  it  cannot  be  called  unjust,  since  it  is  a  condition  that  has 
run  with  land  titles  from  the  beginning,  every  purchaser  having  taken  account 
of  it  and  included  it  in  the  price  he  was  willing  to  pay  for  the  land. 

On  the  other  hand,  the  determination  to  tax  personal  property  equally  with 
real  estate  amounts  to  a  frenzy  in  most  parts  of  the  country,  and  it  happens 
that  mortgages  are  among  the  few  forms  of  "moneyed  capital"  that  can- 
not be  concealed.  In  order  to  be  valid  security,  they  must  be  recorded.  The 
mortgage  is  property  in  the  hands  of  the  holder.  Why,  it  is  asked,  should 
the  lender  on  mortgage  not  bear  his  share  of  the  public  burdens  ?  What 
are  his  merits,  that  he  should  be  favored  at  the  expense  of  all  other  tax- 
payers. 

Yet  there  is  a  wrong  here  which  ought  to  be  righted,  since  there  is  double 
taxation  of  the  same  property,  as  a  very  simple  illustration  will  show. 
Leaving  the  confusing  element  of  money  out  of  the  reckoning,  let  us  con- 
sider a  case  where  the  lender,  A,  happens  to  have  exactly  the  kind  of 
property  that  the  borrower,  B,  wishes  to  acquire  by  mortgaging  his  land,  to 
wit,  cattle.  B  has  land  worth  $2,000,  and  A  has  cattle  worth  $1,000.  A 
transfers  the  cattle  to  B  and  takes  B's  note,  secured  by  mortgage  on  the  land, 


TAXATION  OF  MORTGAGES.  1^7 

for  $l,ooo.  He  might  take  any  other  security  tliat  he  considered  satisfac- 
tory, as,  for  example,  the  endorsement  of  a  third  person,  C,  or  he  might  be 
satisfied  with  B's  unsecured  note,  in  which  case  the  taxing  officers  would 
have  no  prima  facie  evidence  that  any  such  debt  existed.  The  whole 
amount  of  property  in  any  case  is  the  land  $2,000,  and  the  cattle  $r,ooo, 
total  $3,000.  But  if  a  mortgage  on  land  is  given  to  secure  the  debt,  the 
total  property  becomes  $4,000  in  tlie  eye  of  the  law,  viz.,  land  $2,000, 
cattle  $1,000,  mortgage  $1,000,  a  palpable  absurdity,  no  less  than  saying 
that  two  and  one  make  four. 

The  State  of  New  York  palliates  this  absurdity  by  authorizing  the  mort- 
gagor to  deduct  the  amount  of  the  mortgage  from  the  value  of  his  personal 
property.  This  is  in  pursuance  of  a  general  provision  of  the  State  law  that 
all  persons  may  deduct  their  debts  from  the  value  of  their  personal  property. 
If  all  personal  property  were  assessed  for  taxes — in  other  words,  if  the  ideal 
system  that  the  New  York  law  contemplates  were  carried  into  practice — 
there  would  be  no  double  taxation  to  complain  of.  In  the  case  cited  the 
mortgagor  would  pay  the  full  tax  on  the  land,  but  no  tax  on  the  cattle.  The 
mortgagee  would  pay  the  tax  on  the  mortgage,  which  represents  the  value  of 
the  cattle.  If  the  borrower  on  mortgage  chooses  to  erect  buildings  or  to  buy 
other  land,  i.e.,  to  convert  his  borrowed  capital  into  more  real  estate,  which 
is  also  subject  to  tax,  or  to  send  it  out  of  the  State  and  into  the  jurisdiction 
of  another  taxing  power,  he  does  so  on  the  presumption  that  he  can  make 
better  use  of  it  than  to  keep  it  at  home  or  to  invest  it  in  personal  property 
from  which  the  amount  of  his  mortgage  debt  can  be  deducted.  He  makes 
his  election,  and  he  has  nothing  to  complain  of.  If,  after  borrowing  money 
on  mortgage,  he  loses  it — if,  in  the  case  cited,  his  cattle  die  and  he  has  not 
sufficient  personal  property  to  offset  the  debt  on  the  assessment  rolls — there 
is  double  taxation,  the  land  being  still  taxed  at  its  full  value  and  the  mort- 
gage being  taxed  after  the  tangible  property  which  it  represents  has  disap- 
peared. But  such  cases  are  rare,  and  the  law  cannot  provide  for  them,  be- 
cause it  is  impossible  for  the  State  to  keep  track  of  individual  losses. 

The  New  York  law  I  conceive  to  be  perfectly  fair  in  principle.  The  law 
of  any  State  which  taxes  both  land  and  mortgage  without  allowing 
deduction  of  the  debt  from  the  mortgagor's  personal  estate    is  indefensible. 

The  question  may  be  asked,  does  not  the  lender  of  money  on  mortgage 
take  the  tax  into  consideration  and  make  it  a  component  part  of  the  rate  of 
interest  ?  Does  he  not  charge  a  rate  high  enough  to  recoup  himself  for  the 
tax  he  has  to  pay,  in  addition  to  the  prevailing  return  on  capital?  The  com- 
mon belief  is  that  he  does.  The  truth  is  that  he  does  if  he  can,  but  other- 
wise not.  The  prevailing  return  on  capital  will  itself  vary  with  the  tax, 
which  is  simply  one  of  the  expenses  of  production.     The  rate  obtainable  for 


138  TAXATION  OF  MORTGAGES. 

loans  depends  first  and  foremost  upon  the  profit  that  the  borrower  can  real- 
ize. If  he  has  to  pay  a  tax,  his  profits  are  so  much  less,  and  his  ability  to 
pay  interest  on  borrowed  capital  is  so  much  less.  Putting  a  clause  in  the 
mortgage  requiring  the  borrower  to  pay  all  taxes,  as  is  customary  in  Penn- 
sylvania, or  passing  a  law  authorizing  the  mortgagee  to  add  the  tax  to  the 
rate  of  interest,  as  is  the  case  in  Connecticut,  does  not  really  determine  any- 
thing. It  merely  prevents  subsequent  disputes.  It  does  not  tell  us  whose 
pocket  suffers  by  reason  of  the  tax.  The  elements  of  the  problem  are  too 
many  and  too  variable  for  dogmatic  treatment.  My  belief  is  that  the  mort- 
gage tax,  however  laid,  falls  upon  both  parties,  but  the  proportions  are  in- 
determinable. 

The  present  law  of  Massachusetts  (Public  Statutes,  1882,  Chapter  11) 
provides  that  the  mortgagor  and  mortgagee  shall  be  joint  owners  ;  that  the 
land  shall  be  taxed  in  the  name  of  the  mortgagor  for  its  value,  less  the 
amount  of  the  mortgage  ;  and  that  it  shall  be  taxed  in  the  name  of  the 
mortgagee  for  the  remainder.  The  assessors  are  required  to  give  a  bill 
showing  the  interest  of  both.  The  whole  tax  is  a  lien  on  the  land,  which  is 
promptly  sold  in  case  of  default.  In  theory,  therefore,  if  A  owns  a  house 
taxed  for  $10,000,  subject  to  a  mortgage  of  $6,000,  given  to  B,  a  tax  bill  is 
to  be  rendered  A  for  $4,000,  and  to  B  for  $6,000.  In  practice,  however, 
no  such  thing  happens  ;  for  the  same  law  exempts  from  taxable  personal 
property  "  any  loan  on  mortgage  of  real  estate  taxable  as  real  estate."  This 
exempts  the  debt  from  taxation  ;  so  all  that  the  mortgagee  has  to  do  is  to 
take  an  agreement  from  the  mortgagor  to  pay  all  the  taxes  on  the  land, 
which,  being  what  he  always  has  done,  he  is  perfectly  willing  to  do  still. 
As  an  additional  safeguard  against  a  change  of  the  law,  the  mortgagor  is 
also  made  to  agree  to  pay  the  tax  on  the  debt  itself,  in  case  the  law  should 
again  make  it  taxable. 

The  Maryland  Tax  Commission  in  their  recent  report  (January,  18S8) 
recommend  that  no  tax  be  imposed  on  mortgages,  being  convinced  that 
the  tax  will  in  every  case  be  shifted  upon  the  mortgagor,  and  that  even  if  it 
could  be  collected  from  the  mortgagee  the  effect  would  be  to  drive  capital 
away  from  the  State  which  cannot  be  spared. — Ed. 


TAXATION  OF  PERSONAL  PROPERTY. 


The  taxation  of  personal  property  is  one  of  the  greatest  of  all  puzzles 
in  fiscal  science,  and  the  source  of  never-ending  controversy.  The  oppo- 
nents of  such  taxation  rest  their  case  upon  two  grounds  :  first,  the  impossi- 
bility of  finding  and  identifying  the  ownership  of  such  property  with  any 
approach  to  equality  ;  second,  the  inexpediency  of  discouraging  or  driving 
away  movable  property  whose  presence  or  juxtaposition  adds  so  greatly  to 
the  value  of  real  estate.  Both  of  these  objections  are  stated  in  their  great- 
est force  and  with  the  fullest  illustration  in  the  two  reports  of  Mr.  David  A. 
Wells  and  his  associate  Commissioners  to  revise  the  tax  laws  of  the  State  of 
New  York. 

The  first  criterion  of  any  tax  system  is  justice.  It  is  certainly  opposed 
to  justice  to  allow  any  kind  of  property  to  escape  its  share  of  the  public 
burdens.  But  any  criterion  that  cannot  be  put  in  practice  is  an  abstraction 
and  a  delusion.  The  experience  of  American  communities  has  shown  that 
personal  property  cannot  be  taxed  equally  with  real  estate.  Notwithstand- 
ing the  repeated  and  ever-renewed  attempts  to  reach  those  forms  of  per- 
sonalty that  are  grouped  under  the  head  of  "  moneyed  capital '"  in  the  hands 
of  private  persons,  little  headway  has  been  made.  The  amount  of  such 
property  is  rapidly  increasing,  while  the  public  revenue  derived  from  it  is  not 
increasing,  but  in  some  States  is  diminishing,  and  this  without  any  change  in 
the  laws  applicable  thereto.  In  the  State  of  New  York,  for  example,  the 
amount  of  personal  property  on  the  assessment  rolls  for  the  year  1871  was 
$452,607,732.  In  1886  it  had  fallen  to  $335,898,389— a  decline  of  |il6,-= 
709,343.     These  figures  carry  their  own  comment. 

Two  facts  conspire  to  defeat  the  attempt  to  tax  personal  property  of  this 
description.  These  are  (i)  that  the  property  cannot  be  found  by  the  as- 
sessor unless  the  owner  co-operates  with  him  ;  (2)  that  if  it  is  found,  and 
if  the  tax  on  it  becomes  inconvenient,  the  owner  can  shift  his  residence  to 
some  community  which  offers  the  inducement  of  exemption,  or  of  low  taxes,  or 
of  lax  administration,  in  order  to  attract  capital  and  population  to  itself.  For 
purposes  of  residence,  there  is  no  choice  to  be  made  between  the  different 


I40  TAXATION  OF  PERSONAL   PROPERTY. 

States  of  the  Union  as  regards  any  of  the  rights  of  citizenship.  As  between 
adjoining  States,  there  is  little  difference  in  the  matter  of  educational,  relig- 
ious, or  social  advantages.  There  is  no  reason  why  a  person  should  prefer 
New  York  as  a  place  of  residence  rather  than  New  Jersey,  or  Illinois  rather 
than  Wisconsin.  But  the  less  wealthy  and  populous  State  will  be  apt  to 
offer  advantages  in  the  way  of  low  tax  burdens  in  order  to  draw  people  to 
her  own  borders,  and  the  State  which  perceives  a  drain  of  this  sort  setting 
from  herself  to  her  neighbor  will  either  change  her  own  tax  law  or  relax  hel 
administration  of  it.  The  situation  of  New  York  City,  lying  as  a  wedge  be- 
tween the  States  of  New  Jersey  and  Connecticut,  is  such  that  very  slight 
inducements  of  a  pecuniary  sort  will  determine  whether  a  person  doing 
business  here  shall  make  the  city  his  place  of  domicile  and  taxation  or  not. 
Accordingly  a  practice  has  been  adopted  by  the  taxing  authorities  of  New  York 
to  assess  personal  property  at  no  higher  rate  than  is  considered  the  equivalent 
of  the  cost  and  trouble  of  moving  to  New  Jersey  or  Connecticut.  For  this 
practice  the  law  furnishes  facilities  by  not  requiring  the  tax-payer  to  return 
any  schedule  of  his  personal  property.  A  deputy  tax  commissioner  of  the 
city  of  New  York,  while  giving  testimony  in  a  lawsuit  a  few  years  ago,  ex- 
plained the  method  of  arriving  at  the  value  of  personal  property.  The  City 
Directory,  he  said,  was  first  examined  in  order  to  find  the  names  of  persons 
to  be  assessed,  and  an  estimate  of  each  one's  property  was  inferred  from 
the  nature  of  his  business  and  his  place  and  style  of  residence.  "  Our  rule 
is,  then,"  he  continued,  "to  let  the  amounts  remain  from  two  to  three  years  ; 
that  is,  everything  under  $20,000.  Larger  amounts  we  do  not  crowd  up  much, 
unless  we  have  specific  information  about  persons,  but  on  $20,000  or  $25,000 
we  do  not  often  increase  ;  but  if  an  amount  is  smaller  than  that,  once  in  about 
three  years  we  increase  it  from  say  $10,000  to  $12,000.  A  person  assessed 
$1,000  we  should  not  increase  to  $3,000,  but  we  would  increase  one  from 
$3,000  to  $5,000  after  it  had  stood  two  or  three  years."  In  other  words, 
personal  property  in  New  York  City,  other  than  that  of  banks  and  incorpo- 
rated companies,  is  practically  exempt  from  taxation. 

Nor  can  we  see  any  injustice  in  this  fact  as  applied  to  cities,  since  the 
value  of  real  estate  depends  altogether  upon  the  accumulation  of  personal 
property  upon  it.  The  advance  in  the  values  of  building  ground  is  caused 
by  the  growth  of  population,  which  is  made  possible  by  the  growth  and 
concentration  of  capital.  It  is  not  unjust,  therefore,  that  building  ground 
should  bear  the  chief  burden  of  taxation.  It  would  not  be  unjust  if  per- 
sonal property  were  exempted  from  municipal  taxation  altogether.  But  the 
case  is  widely  different  as  regards  agricultural  land.  The  accumulation  of 
personal  property  and  the  growth  of  population  in  New  York  add  nothing 
to  the  value  of  farms  a  few  miles  away  from  the  city.     Flour  and  beef  can 


TAXATION  OF  PERSONAL   PROPERTY.  I4I 

be  brought  hither  from  Dakota,  and  vegetables  from  Norfolk  and  Savannah, 
almost  as  cheaply  as  from  Long  Island.  But  building  lots  cannot  be  im- 
ported from  either  place.  In  other  words,  town  and  city  lots  have  a  monop- 
oly character,  which  farms  have  not. 

The  question  recurs,  Is  it  worth  while  to  make  a  pretence  of  taxing  a 
kind  of  property  that  we  cannot  tax  with  any  approach  to  uniformity,  and 
that  we  do  not  tax  even  so  far  as  we  might,  lest  it  take  to  itself  wings  and 
fly  away?  Is  the  first  criterion  of  taxation,  i.e.,  justice,  satisfied  by  law-, 
that  are  not  enforced?  We  think  the  answer  must  be  in  the  negative,  and 
that  it  would  be  better  to  abandon  all  attempts  to  tax  movable  and  intan- 
gible things  and  look  for  revenue,  for  State  and  local  purposes,  exclusively 
among  those  things  that  are  fixed  and  ascertainable. 

It  cannot  be  admitted,  however,  as  an  economic  truth  that  taxes  on 
land  diffuse  themselves  over  the  community  so  that  personal  property  pays 
its  share  in  an  indirect  way.  A  tax  on  land  is  paid  by  the  land-owner 
alone.  He  cannot  shift  a  penny  of  it  upon  anybody  else,  for  the  reason 
that  he  can  add  nothing  to  the  rental  value  of  land  or  to  the  selling  price  of 
farm  products  by  reason  of  the  tax.  These  are  governed  by  the  law  of  sup- 
ply and  demand.  Suppose  that  A's  building  lot  or  B's  farm  is  taxed  $100 
this  year.  If  the  tax  is  raised  to  $200  next  year,  A  cannot  get  any  higher 
rent  (population  remaining  the  same),  nor  can  B  get  any  better  price  for 
his  wheat  and  bacon.  Both  must  accept  the  market  value  quite  irrespective 
of  the  tax.  In  the  case  of  agricultural  products,  the  market  value  may  be, 
and  generally  is,  fixed  by  transactions  taking  place  in  foreign  lands  many 
thousand  miles  distant,  and  over  which  the  producer  has  no  more  control 
than  he  has  over  the  phases  of  the  moon.  Building  ground  is  space  to 
dwell  and  work  in.  Its  rental  value  is  the  resultant  of  competition  in  the 
strictest  sense.  If  all  taxes  were  abolished  to-morrow,  the  land-owners 
would  not  on  that  account  lower  their  rents,  nor  would  renters  pay  more  if 
the  taxes  were  doubled.  They  would  still  pay  what  the  competition  of 
bidders  for  space  required. 

It  is  said,  however,  that  if  the  land-owner  finds  that  taxation  reduces  his 
profits  below  the  customary  return  on  capital  in  other  trades,  he  will  sell 
out  and  invest  his  money  in  other  things,  and  that  thus  the  land  lax  will  be 
diffused  over  the  whole  community.  But  the  buyer  will  take  the  tax  into 
consideration  also.  The  tax  will  be  capitalized  and  shaved  off  the  price  of 
the  land.  It  will  be  "  diffused  "  in  the  pocket  of  the  seller,  and  nowhere 
else. 

These  remarks  do  not  apply  to  buildings,  which  are  in  their  nature  per- 
ishable, requiring  repairs  and  renewal.  A  tax  on  buildings  is  in  general 
paid  by  the  consumer  of  buildings,  i.e.,    the  tenant,  because  buildings  wilJ 


142  TAXATION  OF  PERSONAL  PROPERTY. 

not  be  erected  unless  the  return  for  the  capital  employed  is  sufficient  to  re- 
imburse all  the  charges — interest,  insurance,  repairs,  renewal  and  tax.  This 
principle  is  not  altered  by  merging  the  ownership  of  both  building  and 
ground  in  the  same  person,  although  the  incidence  of  the  tax  is  less  easily 
traced  in  such  cases.  The  land  tax  is  paid  by  the  owner,  and  the  building 
tax  by  the  occupier, — New  York  Evening  Post. 


TAXATION    OF   CORPORATIONS. 


It  cannot  be  affirmed  that  the  taxation  of  corporations  in  the  United 
States  is  grounded  on  any  well-detined  principles.  The  reason  why  incor- 
porated companies  are  taxed  by  rules  peculiar  to  themselves  is  that  corpora- 
tions partake  of  the  nature  of  both  real  and  personal  property.  They  are 
like  real  estate,  in  the  sense  that  they  are  immovable,  and  always  within 
sight  and  reach  of  the  taxing  authorities.  On  the  other  hand  their  prop- 
erty is  to  a  large  extent  personal,  i.e.,  movable,  circulating.  A  body  of 
law  has  grown  out  of  this  mixed  condition,  but  it  is  in  a  very  chaotic  state. 
For  example,  it  is  still  undetermined  whether  a  tax  on  capital  stock  is  a  tax 
on  the  franchise  or  a  tax  on  the  property.  The  highest  courts  of  New  York 
and  of  Pennsylvania  have  come  to  diametrically  opposite  conclusions  on  this 
point,  the  former  holding  that  it  is  a  tax  on  "franchise  or  business,"  and 
the  latter  that  it  is  a  tax  on  '  property  and  assets."  The  question  is  now 
pending  in  the  Supreme  Court  of  the  United  States. 

The  New  York  law  of  1881  taxing  the  capital  stock  of  corporations 
described  the  impost  as  a  tax  on  the  "corporate  franchise  or  business." 
If  it  were  really  such,  it  would  be  immaterial  in  what  part  of  the  world  the 
property  was  situated,  or  the  business  carried  on.  A  great  deal  of  confu- 
sion and  htigation  arose  under  this  law,  the  corporations  contending  that 
they  were  not  taxable  on  that  portion  of  their  capital  employed  in  other 
States.  The  State  Comptroller  conceded  this  point  as  to  certain  corpora- 
tions, and  denied  it  as  to  others.  The  Court  of  Appeals  held  that  it  was  a 
franchise  tax,  and  that  it  applied  to  the  entire  capital  stock  of  the  Western 
Union  Telegraph  Company,  although  the  property  of  the  company  was 
situated  in  all  of  the  States  of  the  Union,  and  in  several  foreign  countries. 
The  injustice  of  such  a  tax  was  strongly  animadverted  upon  by  the  court  in 
rendering  the  decision.  The  legislature,  accordingly,  in  18S5  changed  the 
law  by  limiting  the  tax  to  "the  amount  of  capital  stock  employed  within 
this  State,"  thus  giving  a  legislative  interpretation  to  the  tax  different  from 
that  given  by  the  court,  and  different  probably  from  that  intended  by  the 


144  TAXATION  OF  CORPORATIONS. 

legislature  of  1881,  which  passed  the  act  in  question.  In  Pennsylvania,  the 
tax  was  simply  imposed  on  "capital  stock,"  and  the  courts  in  that  State 
have  always  held  that  this  means  '"  property  and  assets,"  as  distinguished 
from  franchise,  or  the  right  to  transact  business  in  the  particular  way  de- 
scribed in  the  act  of  incorporation. 

There  is  a  great  variety  of  taxes  in  the  United  States  that  go  by  the 
name  of  franchise  tax,  although  their  legal  classification  may  be  more  or 
less  open  to  dispute,  viz.  : 

1.  A  premium  on  the  granting  of  the  charter,  which  is  paid  in  whole  or 
in  part  before  organization. 

2.  An  annual  tax  of  several  kinds  : 

a  Based  on  capital  stock  in  proportion  to  the  amount  of  dividends 

paid  or  declared. 
b  Based  on  capital  stock  according  to  its  actual  or  market  value,  when 

there  are  no  dividends. 
c  Based  on  the  earnings,  gross  or  net. 

d  Based  on  total  value  of  property,  tangible  and  intangible,  whether 
represented  by  capital  stock  or  bonded  debt,  or  both  together. 
This  is  usually  measured  by  mileage  in  the  case  of  transportation 
companies. 
e  Based  on  the  business  done — as  in  Massachusetts,  on  the  average 
deposits  in  savings-banks  and  trust  companies,  and  on  the  num- 
ber of  telephones  used  by  telephone  companies  ;  as  in  Tennessee, 
on  the  number  of  parlor  and  sleeping  cars  run  by  a  parlor  car 
company  ;  as  in  New  York,  on  the  average  deposits  of  foreign 
banking  companies  ;  as  in  Pennsylvania,  formerly,  on  each  ton 
of  coal   mined  ;  as  in  Texas,  on  each  telegram  sent  by  a  tele- 
graph company. 
/  Based  on  the  capital,  at  par,  regardless  of  value,  as  in  New  Jersey 
and  Massachusetts,  for  certain  classes  of  corporations. 
In  the  year  1S79  a  Committee  of  State  Railroad  Commissioners,  consist- 
ing of  Messrs.  C.  F.  Adams,  Jr.,  W.  B.  Williams  and  J.  H.  Oberly,  made  a 
report   on  the  taxation  of   railroads  and  railroad  securities  in   the    United 
Slates  and  in    foreign    countries.     They  found   almost'  every  conceivable 
variety  of  method  prevailing  in  the  several  States.     They  found  that  the 
States  of  Michigan  and  Wisconsin  had  adopted  a  verj'  simple  and  workable 
plan  of  taxing  the  gross  receipts  of  railroad  companies,  exempting  them  and 
their  share-holders  from  all  other  taxation,  either  State  or  municipal,  except 
on  their  real  property  not  included  in  their  right  of  way.      They  accordingly 
recommended  this  plan  for  general  adoption,  but  they  added  : 

"  The  apportionment  of   a  levy  on  gross  receipts  among    the   several 


TAXATION  OF  CORPORATIONS.  1 45 

States  through  which  a  single  railroad  may  run  is  in  this  country  un- 
doubtedly attended  with  much  difficulty,  and  the  committee  have  given  care- 
ful consideration  to  the  subject.  The  conclusion  at  which  they  have 
arrived  is  that  it  should  be  made  a  matter  of  mutual  understanding  among 
the  States,  and  that,  as  the  levies  must  be  independent,  they  should  be  ap- 
portioned according  to  mileage." 

Additional  force  was  lent  to  the  last  paragraph  above  quoted  by  a  de- 
cision of  the  Supreme  Court  of  the  United  States  rendered  in  May,  18S7,  to 
the  effect  that  all  State  taxes  on  gross  receipts  from  interstate  or  foreign 
commerce  are  unconstitutional.  It  thus  appears  that  what  the  committee 
found  to  be  difficult  in  practice  is  impossible  in  law,  and  that  anything 
which  has  its  foundation  on  the  mutual  understanding  of  the  States  has  no 
foundation  at  all.  The  case  before  the  court  was  that  of  the  P hiladelphia 
and  Sotithern  Mail  Steamship  Company  v.  Commonwealth  of  Pennsylvania. 
It  arose  under  a  law  of  the  State  of  Pennsylvania,  passed  in  1877,  which 
taxed  the  gross  receipts  of  all  transportation  companies  incorporated  by  or 
doing  business  in  the  State,  iiTespective  of  the  place  where  the  earnings 
were  made.  The  Steamship  Company  pleaded  that  no  part  of  its  earnings 
was  made  within  the  State  of  Pennsylvania,  but  that  all  were  made  from 
interstate  and  foreign  commerce.  The  decision  of  the  court  was  based 
upon  that  clause  of  the  Constitution  which  gives  to  Congress  the  power  "  to 
regulate  commerce  with  foreign  nations,  and  among  the  several  States,  and 
with  the  Indian  tribes."  It  not  only  holds  that  the  tax  on  the  gross  receipts 
of  this  company  is  unconstitutional,  but  the  argument  goes  to  the  point  that 
any  State  tax  on  the  internal  traffic  of  the  couniry,  which  traffic  crosses  the 
boundary  of  a  State,  is  unconstitutional.  While,  in  other  words,  a  State 
may  tax  the  gross  income  derived  from  the  transportation  of  flour  coming 
from  Buffalo  to  New  York,  it  cannot  tax  that  of  flour  coming  from  Minne- 
apolis by  way  of  Buffalo  to  New  York. 

That  the  public  authorities  of  Pennsylvania  so  understand  the  decision 
is  evident  from  the  fact  that  they  arc  now  taking  steps  to  abolish  the  tax  on 
gross  receipts  of  transportation  companies  .altogether,  and  to  sulistitute  a 
property  tax  in  place  of  it,  estimating  the  value  of  railroads  by  adding  to- 
gether their  entire  funded  debt  at  par  and  their  capital  stock  at  its  actual 
value,  and  taxing  this  aggregate  sum  in  the  proportion  that  the  mileage  in 
Pennsylvania  bears  to  the  whole  mileage  operated.  This  plan,  whicli  is 
already  in  force  in  Connecticut,  involves  the  taxation  of  a  company  for  its 
debts,  and  is  in  reality  a  mixing  together  of  objective  and  subjective  taxes, 
A  tax  on  a  locomotive  is  an  objective  tax.  The  assessor  can  ascertain 
its  value,  and  can  seize  and  sell  it,  if  the  tax  is  not  paid.  The  State  is 
not  bound  to  inquire  whether  the  person  using  it  has  paid  for  it,  or  whether 

7 


146  TAXATION  OF  CORPORATIONS. 

he  is  in  debt  for  it,  in  whole  or  in  part,  or  whether  the  debt  is  secured  by 
mortgage,  or  not  secured  at  all.  The  locomotive,  the  object,  the  visible  and 
tangible  thing  is  taxed. 

A  subjective  tax  is  a  tax  on  persons  and  corporations,  because  they  are 
worth  so  much  money.  Of  course  they  are  worth  only  the  amount  of  their 
possessions,  minus  their  debts.  The  proposed  law  of  Pennsylvania,  like 
the  present  law  of  Connecticut,  taxes  the  railroad  subjectively,  but  upon  the 
presumption  that  it  has  objects  in  use  and  under  its  control,  worth  as  much 
as  its  debts  and  capital  stock  added  together. 

This  plan  seems,  at  first  glance,  to  be  unjust,  but  it  is  not  necessarily  so. 
If  a  railroad  pays  $100,000  per  year  in  taxes  it  is  immaterial  whether  the  levy 
is  made  on  its  gross  receipts,  or  on  its  capital  stock,  or  on  its  stock  and  bonds 
added  together.  But  when  we  consider  the  relative  situation  of  two  roads 
in  the  same  State,  and  making  the  same  earnings,  the  one  having  a  large 
debt  and  a  small  capital  stock  and  the  other  a  small  debt  and  a  large  capital 
stock,  it  becomes  apparent  that  they  ought  to  pay  the  same  amount  of  taxes  ; 
and  this  would  not  be  the  case  if  debts  were  deducted.  It  would  be  neither 
wise  nor  just  to  tax  one  more  heavily  than  the  other,  because  its  finances 
have  been  more  prudently  managed  and  because  it  has  pursued  the  policy  of 
paying  its  debts  as  they  fall  due  instead  of  issuing  new  bonds  to  take  up  old 
ones.  There  is  nothing  easier  to  create  than  railroad  debts.  It  is  not  good 
policy  for  the  State  to  encourage  such  debts  by  offering  exemption  from 
taxes  on  that  portion  of  the  property  represented  by  the  bonds. 

That  railroads  and  other  corporations  of  a  monopoly  character  are  far 
from  paying  their  due  proportion  of  taxes,  the  proportion  which  real  estate 
and  other  immovable  and  ascertainable  property  pays,  there  is  good  reason 
to  believe.  Comptroller  Chapin,  of  New  York,  in  a  special  report  to  the 
Legislature,  dated  March  30,  18S6,  showed  that  the  New  York  Central  Rail- 
road was  paying  a  tax  of  only  eight  mills  on  its  value,  whereas  citizens  were 
paying  seventeen  mills  average.  "  Yet  it  is  admitted,"  he  says,  "  that  this 
corporation  has  been  exceptionally  fair  toward  the  public  in  its  construction 
of  the  tax  law,  and  has  paid  proportionately  much  more  than  other  corpora- 
tions."' The  Maryland  Tax  Commission  are  extremely  indignant  at  finding 
that  the  railroad  corporations  of  the  State,  which  are  taxed  on  the  basis  of 
their  gross  receipts,  really  pay  for  State  taxes  only  one-half  what  a  private 
citizen  would  pay  on  the  same  value. — Ed. 


TAXATION  OF  "LAND  VALUES. 


There  has  been  so  much  political  agitation  during  the  past  year  on  the 
subject  of  the  taxation  of  "  land  values"  that  this  work  would  not  be  com- 
plete without  some  notice  of  it.  The  doctrine  espoused  by  the  United 
Labor  party  of  New  York,  under  the  leadership  of  Mr.  Henry  George,  is 
stated  in  the  platform  adopted  by  the  Syracuse  Convention,  August  I2th, 
1887,  as  follows  : 

"  What  we  propose  is  not  the  disturbing  any  man  in  his  holding  or  title, 
but,  by  abolishing  all  taxes  on  industry  or  its  products,  to  leave  to  the  pro- 
ducer the  full  fruit  of  his  exertions,  and  by  the  taxation  of  land  values,  ex- 
clusive of  improvements,  to  devote  to  the  common  use  and  benefit  those 
values  which,  arising  not  from  the  exertion  of  the  individual  but  from  the 
growth  of  society,  belong  to  the  community  as  a  whole." 

We  observe,  in  the  first  place,  that  neither  land  nor  land  values  ever  pay 
taxes.  Things  do  not  pay  taxes.  Taxes  on  land  are  paid  by  land-owners, 
as  has  been  shown  on  a  preceding  page.  The  proposition  therefore  is,  that 
land-owners  shall  pay  all  the  taxes  for  the  support  of  government,  both  gen- 
eral and  local,  and  that  nobody  else  shall  pay  any  taxes  ;  with  the  further 
proviso  that,  if  anything  in  the  way  of  "  land  values  "is  left  over,  that  shall 
be  taken  also  and  applied  to  the  common  use  and  benefit. 

The  assumption  that  land  values  arise  from  the  growth  of  society  is  a 
half  truth,  the  other  half  being  the  fact  that  the  growth  of  society  is  made 
possible  by  the  cultivators  of  the  soil,  who  are  in  this  country  mainly  the 
land-owners.  It  is  certain  that  land  does  not  produce  wealth,  except  in  very 
limited  quantity,  without  labor.  Of  the  two  sources  of  wealth,  land  and 
labor,  the  latter  counts  for  everything  that  the  former  would  not  yield  spon- 
taneously, such  as  grass,  nuts,  wild  fruit,  wild  animals,  etc.  If  we  were  to 
agree  that  all  these  spontaneous  products  or  their  equivalent,  as  nearly  as  it 
can  be  ascertained,  should  be  applied  to  the  common  use  through  the 
medium  of  taxation,  how  far  would  they  go  toward  the  support  of  modern 
governments?  Would  anything  be  left  over  to  apply  to  the  abolition  of  pov- 
erty in  private  circles? 

But  we  are  told  that  rent  exists  nevertheless,  that  it  has  not  been  pro- 


148  TAXATION  OF  "LAND    VALUES." 

duced  by  the  land-owner,  and  that  it  ought  to  belong  to  the  whole  people. 
Economic  rent  is  the  price  that  is,  or  might  be,  obtained  for  the  use  of  un- 
improved land.  It  is  measured  by  the  yield  of  some  particular  land  over 
and  above  the  yield  of  the  poorest  land  in  use,  i.  e.,  land  that  yields  nothing 
but  ordinary  wages  and  ordinary  interest  on  the  capital  employed  in  tillage 
or  other  improvement.  Accordingly  rent  does  not  exist  absolutely  but  rela- 
tively. 

The  relations  which  cause  rent  to  exist  are  those  of  peculiar  fertility  or 
situation.  Land  A  may  be  more  fertile  than  land  B,  or  it  may  be  nearer  to 
market.  In  either  case  it  will  yield  more  rent  unless  other  circumstances 
counteract  this  tendency.  If  all  the  land  in  a  country  is  of  equal  fertility, 
and  the  supply  is  still  unexhausted,  rent  will  only  arise  from  differences  of 
situation.  If,  in  such  case,  differences  of  situation  could  be  neutralized  by 
cheapness  and  quickness  of  transportation  rent  would  not  exist  at  all. 

We  are  speaking  now  of  agricultural  rent,  looking  at  the  practical  bear- 
ings, if  any,  of  the  proposed  exaction  of  the  whole  State  revenue  from  land- 
owners, and  a  general  prosperity  fund  besides. 

Higher  fertility  counts  for  little  in  this  country  at  present,  as  a  factor  in 
producing  rent.  In  the  older  States  the  original  fertility  has  long  since  been 
exhausted,  and  either  replaced  by  artificial  fertility  or  not  replaced  at  all. 
In  the  newer  parts  of  the  country  economic  rent  does  not  exist,  because  land 
can  be  had  for  the  trouble  of  occupying  and  cultivating  it.  Difference  of 
situation  is  the  only  rent-making  element  worth  taking  into  account,  and 
even  this  is  so  insignificant  as  regards  agricultural  land  that  the  most  fav- 
orably situated  farms  in  the  New  England  States,  where  the  population  is 
densest,  can  hardly  be  rented  at  all,  even  with  the  improvements  that  have 
been  made  upon  the  soil.  Good,  unimproved  agricultural  land  within  forty 
miles  of  the  city  of  New  York  has  been  offered  without  takers,  free  of  rent, 
for  many  years,  to  any  person  who  would  take  it  and  cultivate  it.  Great 
quantities  of  land  in  the  Adirondack  region  have  been  sold  for  taxes  and 
abandoned  by  the  owners,  of  late  years.  The  quantity  of  land  falling  into  the 
State's  ownership  in  this  way  has  become  so  important  in  some  places  that  a 
serious  deficit  has  arisen  in  the  local  taxes,  making  it  necessary  for  the  State 
in  some  cases  to  pay  local  taxes  on  its  own  land,  which  it  does  by  remitting 
to  the  counties  in  which  the  land  is  situated  a  corresponding  amount  of  their 
dues  to  the  State.     (See  Laws  of  18S6,  chapter  2S0.) 

I  have  heard  an  eminent  professor  in  a  New  England  college  say  that 
he  had  been  looking  all  his  life  for  a  case  of  economic  rent  in  the  agricul- 
tural districts  of  the  New  England  States,  but  had  not  yet  found  one.  In 
other  words,  the  present  tax  on  farming  land  there  exhausts  the  economic 
rent,  and  fully  realizes  the   platform  of  the    United   Labor  party.     If  any 


TAXATION  OF  ''LAND    VALUES."  149 

heavier  tax  is  imposed  the  farms  will  be  abandoned  to  the  State.  The 
cheapness  of  transportation  from  the  more  productive  lands  of  the  West  is 
the  cause  of  the  disappearance  of  agricultural  rent  in  New  England,  and 
also  of  the  great  shrinkage  of  rent  in  old  England.  There  are  probably 
places  where  agricultural  rent  can  be  found  in  the  Central  and  Western 
States,  but  when  the  capital  value  of  improvements  attached  to  or  embodied 
in  the  soil  is  deducted,  the  residuum  of  purely  economic  rent  must  be  ex- 
tremely small,  and  must  continue  small  so  long  as  there  is  any  considerable 
amount  of  arable  land  in  this  country  or  in  Canada  unoccupied. 

When  cheap  transportation  has  so  far  neutralized  advantages  of  situa- 
tion that  economic  rent  has  ceased  to  exist  in  the  most  populous  parts  of  the 
country,  where  it  ought  to  be  most  flagrant  and  conspicuous,  where  are  we 
to  look  for  the  "land  values"  that  shall  yield  such  a  gushing  revenue  that 
nobody  but  land-owners  need  pay  any  taxes  ?  Perhaps  the  answer  will  be 
that  we  shall  find  it  in  town  and  city  lots. 

If  we  take  the  city  of  New  York  as  a  pre-eminent  example,  we  find  that 
the  taxes  imposed  for  State  and  local  purposes  in  1S87  amounted  to  $32,370,- 
696.78.  Of  this  sum  the  owners  of  real  estate,  land  and  buildings  together, 
paid  $27,097,022.93,  while  banks,  corporations,  and  the  owners  of  personal 
property  together  paid  only  $5,273,673.85.  But  if  the  owners  of  real  estate 
should  pay  the  whole  it  would  not  exhaust  rent.  There  would  still  be 
something  left  over. 

It  is  customary  to  say  that  this  something  left  over  is  the  common  herit- 
age of  all  mankind.  Although  the  land-owner  may  have  paid  its  just  value, 
although  he  may  pay  five-sixths  of  the  entire  cost  of  supporting  the  govern- 
ment, and  its  educational  and  charitable  institutions, — that  is,  promoting 
the  "  growth  of  society  " — year  after  year,  yet  it  is  contended  that  he  has 
stepped  into  the  heritage  of  other  people  and  that  he  ought  to  be  dispos- 
sessed. If  we  ask  how  you  know  that  lots  in  New  York  are  the  heritage  of 
all  mankind,  or  of  that  particular  portion  of  mankind  who  choose  to  dwell 
here,  the  argument  takes  a  theological,  or  teleological,  turn  at  once,  and  we 
are  asked  whether  the  Almighty  can  be  supposed  to  have  sent  anybody  into 
the  world  disinherited,  or  without  some  share  in  the  land.  This  is  a  hard 
question.  We  cannot  penetrate  the  divine  mysteries,  but  we  can  say  with 
considerable  confidence  that  it  is  quite  as  likely  the  Almighty  intended  that 
some  people  should  not  have  land,  as  that  he  intended  that  they  should  take 
it  away  from  other  people  without  compensation,  after  having  agreed  in 
writing  that  they  would  not  do  so. — Ed. 


TAXES    ON    CONSUMPTION. 


The  revenue  of  the  United  States  Government  is  derived  almost  wholly 
from  taxes  on  consumption,  customs  duties  yielding  $217,000,000,  and  inter- 
nal revenue,  or  excise  duties,  $120,000,000.  The  author  of  this  treatise 
declines  to  enter  into  the  discussion  of  protectionism,  as  not  being  a  fiscal 
question.  It  will,  therefore,  not  be  introduced  as  a  note.  But  the  great 
preponderance  that  taxes  on  consumption  bear  in  our  system  of  national  tax- 
ation requires  some  comment. 

In  the  first  place,  let  us  remark  that  taxes  on  property  and  on  income,  at 
a  period  not  very  remote,  yielded  by  far  the  larger  part  of  the  internal  rev- 
enue. In  the  year  1866,  the  following  sums  were  received  from  taxes, 
which  have  since  been  repealed  : 


From  manufactures,  other  than  liquor  and  tobacco. 

incomes 

stamps 

gross  receipts 

licenses  other  than  liquor  and  tobacco 

sales 

salaries 

legacies  and  successions 

billiard  tables,  carriages,  pianos,  etc 

banks,  railroads,  etc . 

miscellaneous 

Internal  taxes  still  remaining  yielded  in  1866  : 


$127,528,610 
61,071,932 

15.044,373 

11,262,430 

14,011,132 

4,002,283 

3.717,395 
1,170,979 
1,693,123 
12,109,420 
4,440,290 

$256,051,967 


From  distilled  spirits $29,198,578 

"     fermented  liquors 5,115,140 

"     tobacco,  snuff  and  cigars 16,514,333 

"     licenses,  liquor  and  tobacco 4,026,966 

$54,855,017 

The  internal  revenue  at  the  present  time  (Januaiy  i,  1888)  is  made  up  of 
taxes  on  the  following  articles,  viz. : 


TAXES  ON  CONSUMPTION.  I51 

Fiscal  Year,  18S7. 

Distilled  spirits $65,829,321 

Fermented  liquors 21,922,187 

Tobacco 30, 108,067 

Oleomargarine 723,948 

National  bank-notes 2,385,851 

$120,969,374 

It  is  stated  in  the  text  that  taxes  on  consumption  are  justifiable  on  two 
grounds  :  first,  because  the  budgets  of  modern  times  cannot  be  balanced 
without  them  ;  and  second,  because  they  are  the  only  means  of  reaching  the 
working  classes,  who  ought  not  to  enjoy  all  the  advantages  of  government 
without  contributing  an3^hing  to  its  support.  Professor  Cossa  did  not  have 
in  view  a  country  which  derives  its  national  revenue  wholly  from  taxes  of 
this  kind.  Nor  did  he  have  in  view  a  country  whose  budget  might  easily 
be  balanced  without  any  taxes  on  consumption,  if  that  policy  were  desirable. 

The  total  expenses  of  the  government  for  the  fiscal  year  1887,  other  than 
for  interest  and  sinking  fund,  were  $220,190,602.  It  appears,  therefore, 
that  taxes  exceeding  by  $36,000,000  the  whole  ordinary  expenses  of  the  gov- 
ernment have  been  repealed  since  the  year  1866,  and  that  these  have  been 
mostly  taxes  on  property.  Taxes  on  income,  gross  receipts,  corporations, 
legacies,  occupations,  sales  and  stamp  duties  are  paid  by  the  persons  out  of 
whose  pockets  they  first  come.  There  is  no  repercussion  here.  And  in 
general  it  may  be  assumed  that  a  tax  falls  on  the  first  payer  unless  the  con- 
trary can  be  clearly  shown,  as  it  can  be  in  the  case  of  customs  duties  and 
the  excise  tax  on  liquors  and  tobacco.  Everybody  knows  that  the  importer, 
the  distiller  and  the  tobacconist  merely  advance  the  tax  to  the  government 
and  collect  it  back  from  the  consumer,  together  with  interest  on  the  amount 
advanced. 

How  far  the  internal  tax  on  manufactures,  while  it  lasted,  was  a  tax  on 
consumption,  it  is  difficult  to  say.  The  increase  of  customs  duties,  which 
was  made  simultaneously,  was  intended  to  convert  it  into  a  tax  on  consump- 
tion by  enabling  the  manufacturer  to  add  the  amount  of  the  tax  to  the  price 
of  the  article  produced.  Probably  it  did  not  have  this  effect  in  all  cases. 
When  the  internal  tax  was  repealed  the  corresponding  customs  duties  were 
left  unrepealed,  except  in  a  few  cases.  The  effect  of  this  was  to  enable  the 
manufacturer  of  articles  subject  to  foreign  competition  to  recoup  himself 
very  speedily,  even  if  he  had  not  done  so  while  the  internal  tax  was  in  force. 

In  the  year  1776  Adam  Smith  stated  four  rules  of  taxation,  which  have 
been  accepted  by  tlie  whole  civilized  world,  and  by  all  governments  in  it, 
as  the   maxims  of  justice  applied  to  that   matter.     The  first  of  these  rules 


152  TAXES   ON  CONSUMPTION. 

says  that  "  the  subjects  of  every  State  ought  to  contribute  to  the  support  of 
the  government  as  nearly  as  possible  according  to  their  respective  abilities." 
This  means,  of  course,  that  the  man  whose  income  is  $5,000  ought  to  pay 
ten  times  as  much  as  the  one  whose  income  is  !^500,  and  so  on.  Nobody 
denies  the  truth  of  this  maxim  except  some  writers  who  contend  that  the 
man  whose  income  is  $500  or  less  ought  not  to  pay  any  taxes.  I  think  that 
he  ought  to  pay  something  and  ought  to  know  that  he  pays  it. 

Since  our  national  taxes  are  levied  on  consumption  it  is  evident  that 
the  people  of  the  United  States  are  not  paying  taxes  "  according  to  their  re- 
spective abihties,"  but  according  to  their  respective  needs.  The  man  with 
$5,000  income  is  not  paying  ten  times  as  much  as  the  man  with  $500,  as 
ever)'body  knows  that  he  ought  to.  They  are  each  paying  according  to 
their  consumption.  The  man  with  $5,000  income  does  not  consume  ten 
times  as  much  of  dutiable  goods  as  the  man  with  $500  income.  He  may 
consume  a  little  more,  but  not  much  more.  The  things  he  buys  may  be  of 
superior  quality,  but  it  does  not  follow  that  he  pays  any  more  tax  on  that 
account.  On  anything  that  is  taxed  by  the  pound,  the  yard,  or  the  gallon — 
and  most  things  are  so  taxed — the  poor  man  pays  as  much  as  the  rich  man, 
whatever  be  the  quality  or  style  of  the  things  used  by  them  respectively.  It 
results  that  Adam  Smith's  first  rule  is  not  followed  in  this  country.  It  re- 
sults that  the  very  opposite  course  is  pursued.  It  results  that  people  do  not 
pay  taxes  according  to  their  means,  but  according  to  their  wants,  which  is 
the  very  opposite  criterion. 

Our  State  and  local  taxes  are  paid  principally  by  assessments  on  property. 
These  amounted  in  the  year  1880  to  $302,000,000.  They  may  now  reach 
$350,000,000,  or  about  the  sum  collected  by  the  national  government  by 
customs  and  excise  duties.  It  is  a  question  for  statesmen  and  philanthro- 
pists, as  well  as  for  trade-unions,  to  consider,  whether  one-half  of  the  entire 
burden  of  government  in  all  its  departments,  national,  state,  and  municipal, 
should  be  paid  by  taxes  on  consumption,  which  are,  in  a  rough  way,  taxes  per 
capita,  since  all  are  consumers.  Taking  into  account  all  the  public  contribu- 
tions which  support  civilized  society  in  this  country,  I  consider  that  Adam 
Smith's  first  rule  is  grossly  violated,  and  that  the  wage-earners  and  the  tax- 
payers of  small  incomes  bear  an  undue  and  disproportionate  share  of  the 
burden  of  taxation.  I  consider,  further,  that  the  solution  of  what  is  called 
the  "  social  problem"  should  begin  by  lightening  the  taxation  of  the  wage- 
workers  ;  that  is,  by  the  reduction  or  repeal  of  taxes  on  consumption.  The 
first  thing  to  be  done  for  the  working  man  is  to  let  him  enjoy  what  he  earns. 
When  this  is  done,  and  when  good  education,  technical  and  other,  is  offered 
to  him  and  his  children,  the  social  problem  will  be  solved,  so  far  as  govern- 
ments can  deal  with  it. — Ed. 


PART    IV. 

The  Relation  Between  Public  Receipts 
AND  Expenditures. 


CHAPTER  I. 

GENE  R  A  L     IDEAS. 

The  proper  relation  between  public  receipts  and 
expenditures  is  that  of  equilibrium  or  equalization  ; 
because,  as  a  rule,  it  is  not  permissible  to  take 
from  the  national  resources  either  more  or  less 
than  is  necessary  to  meet  the  public  expenses  of 
the  current  fiscal  period.* 

In  order  to  obtain  the  desired  balance  the  re- 
ceipts must  be  regulated  by  the  expenditures,  so 
that  the  one  may  coincide  with  the  other,  both  as 
to  their  amount  and  as  to  the  periods  of  collection 
and  disbursement. 

*  The  Secretary  of  the  United  States  Treasury  in  his  annual  report,  Dec. 
5,  1887,  said  that  there  was  at  that  time  a  surpUis  in  the  Treasury,  over  and 
above  all  requirements,  of  $55,258,701.19,  and  that  it  would  probably 
amount  to  about  $140,000,000  on  the  30th  day  of  June,  188S.  He  said  also 
that  the  requirements  of  the  sinking  fund  of  the  public  debt  for  the  current 
fiscal  year,  amounting  to  $46,817,785.48,  had  all  been  met,  except  a  very 
small  fraction,  prior  to  Nov.  i,  1887. 
-* 


154         PUBLIC  RECEIPTS  AND  EXPENDITURES. 

In  practice,  however,  the  relation  frequently  hap- 
pens to  be  abnormal — that  is,  a  want  of  equilibrium 
exists,  which  can  take  place  : 

I  St.  Through  a  surplus — that  is,  an  excess  of  re- 
ceipts over  expenditures  ;  and  this  may  be  kept  in 
reserve,  invested,  or  better,  be  eventually  applied  to 
the  payment  of  previously  contracted  debts,  or  to 
the  partial  or  total  abolition  of  onerous  taxes  ; 

2d.  Through  a  deficit — that  is,  an  excess  of  ex- 
penditures over  receipts.  The  deficit  may  be  tem- 
porary, if  it  is  owing  to  the  accidental  delay  of 
certain  receipts  or  to  the  anticipation  of  certain 
disbursements  ;  or  it  may  be  permanent,  if  it  is  due 
to  financial  disorder  which  defies  all  efforts  at  ob- 
taining a  balance. 

A  deficit  may  be  owing  to  an  increase  of  ex- 
penses, or  to  a  diminution  of  receipts,  caused  by 
war,  by  revolution,  or  by  scarcity  or  any  other  eco- 
nomic crisis,  or  by  extraordinary  public  works  (as 
by  the  construction  of  railways). 

The  deficit  may  be  met  either  by  prudently  re- 
ducing expenses,  whenever  it  is  possible,  or  by 
discovering  new  sources  of  revenue.  The  latter 
may  be  obtained  : 

I  St.  By  the  sale  of  the  fiscal  domain,  which,  un- 
der the  circumstances  already  mentioned,  will  but 
seldom  yield  any  profits  ; 

2d.  By  resorting  to  the  treasury  reserve — that 
is,  to  the  surplus  accumulated  in  times    of   pros- 


PUBLIC  RECEIPTS  AND  EXPENDITURES.  155 

perity — a  plan  which  has  been  largely  followed  in 
the  past,  but  which  has  the  inconvenience  of  with- 
drawing too  long  from  the  channels  of  industry 
considerable  amounts  of  capital,  and  in  the  pres- 
ent day  can  only  be  allowed  as  an  exception  and 
within  strict  limits ; 

3d.  By  means  of  anticipations,  to  be  reimbursed 
in  successive  financial  periods,  or  by  raising  the 
rates  of  pre-existing  taxes,  or  by  introducing  new 
ones  ; 

4th.  By  using  the  public  credit — that  is,  by  con- 
tracting debts — an  expedient  which  in  the  present 
day  is  generally  preferred,  and  which  therefore  re- 
quires more  minute  consideration. 

To  the  avoidance  of  deficits  nothing  contributes 
more  than  the  compilation  of  the  exact  balances 
(estimated  and  ascertained)  of  the  public  receipts 
and  expenditures  to  be  submitted  in  free  States  to 
the  approval  of  the  deliberative  assemblies.  In 
the  opinion  of  many  the  annual  discussion  of  the 
budget  would  gain  in  importance  if  it  were  lim- 
ited to  only  one  part  (the  variable),  while  for  the 
other  part  (the  permanent)  an  examination  re- 
peated at  longer  intervals  should  suffice. 


156  PUBLIC  RECEIPTS  AND  EXPENDITURES, 


CHAPTER  II. 

THE      PUBLIC      DEBT. 

The  public  credit — that  is,  the  faculty  of  con- 
tracting debts  on  relatively  favorable  conditions — 
depends,  as  does  the  credit  of  the  individual,  on 
the  circumstances  which  influence  the  purpose, 
and  the  possibility  of  fulfilling  the  obligation  con- 
tracted.  In  particular  it  depends  on  the  political 
and  administrative  arrangements,  on  the  financial 
conditions — that  is,  on  the  system  of  taxation,  on 
the  amount  of  pre-existing  debts ;  and  finally,  on 
the  economic  condition — that  is,  on  the  state  of 
the  national  wealth. 

Public  loans  have  been  greatly  extolled  by  many 
writers  in  the  past  ;  but  later,  by  an  exaggerated 
reaction  against  abuses  in  practice,  and  through  a 
false  conception  of  the  action  of  the  State,  to  which 
all  economic  competence  is  denied,  they  have  been 
absolutely  condemned,  or  only  tolerated  as  a  neces- 
sary evil. 

With  regard  to  their  legitimacy,  it  is  to  be  ob- 
served : 

I  St.  That  ordinary  expenses  must  be  covered  by 
ordinary  receipts,  and  especially  by  taxation  ; 

2d.  That  extraordinary  expenses  may,  according 


PUBLIC  RECEIPTS  AND  EXPENDITURES.  157 

to  circumstances,  be  met  by  means  of  either  taxes 

or  loans. 

In  respect  to  the  different  sorts  of  extraordi- 
nary expenses,  public  loans  are  especially  admissi- 
ble when  in  support  of  public  works — that  is,  of 
the  productive  employment  of  capital  by  the  bor- 
rower. Recourse  may  also  be  had  to  public  loans 
when  extraordinary  expenses  are  incurred  on  ac- 
count of  war,  revolution,  famine,  etc. — that  is,  in 
the  case  of  an  employment  of  capital  only  indi- 
rectly productive  to  the  public  authority  (includ- 
ino-  reforms  of  the  armament  or  of  the  administra- 
tion),  in  so  far  as  it  brings  an  advantage  to  society 
which  is  not  limited  to  the  financial  period  in 
which  the  expense  is  incurred. 

From  the  economic  point  of  view — that  is,  in  re- 
gard to  their  effects  on  private  wealth — public 
loans,  which  always  import  a  subtraction  of  exist- 
ing capital  from  the  national  resources,  and  not  at 
all  an  imaginary  and  absurd  anticipation  of  future 
capital,  seem  preferable  to  an  increase  of  taxation, 
when  the  latter  happens  to  be  badly  distributed, 
and  when  the  loan  is  contracted  with  foreign  cap- 
italists, or,  if  contracted  with  home  capitalists, 
when  the  loan  absorbs  only  the  surplus  capital, 
without  having  recourse  to  that  which  is  already 
well  invested  in  industrial  enterprises,  upon  which 
otherwise  serious  injury  might  be  inflicted. 

From  the  political  point  of  view  the  advantages 


158         PUBLIC  RECEIPTS  AND  EXPENDITURES. 

and  disadvantages  of  loans,  which  are  frequently 
exaofsferated,  offset  each  other ;  for  if,  on  the  one 
hand,  they  directly  interest  a  class  of  numerous  and 
powerful  capitalists,  in  the  maintenance  of  public 
order  and  the  preservation  of  peace,  on  the  other 
hand,  it  is  not  less  true  that  they  excite  the  discon- 
tent of  the  tax-payers  who  are  charged  with  the 
payment  of  the  interest,  and  at  the  same  time  in 
relations  with  foreign  countries  they  lead  to  a  kind 
of  dependence  of  the  indebted  State  on  that  to 
which  its  creditors  belong. 

In  respect  to  the  advantages  promised  to  the 
creditor,  public  loans  are  divided  into  productive, 
to  wit,  interest-bearing,  and  unproductive,  non- 
interest-bearing.  The  former  are  now  the  rule, 
the  latter  the  exception. 

In  respect  of  the  guarantee  given  to  the  creditor, 
they  are  to  be  distinguished  as  : 

I  St.  Loans  secured  by  the  pledge  of  certain 
revenues  set  apart  before  all  for  the  payment  of 
interest  and  for  the  reimbursement  of  the  principal. 
These  loans,  much  in  vogue  in  the  past,  sometimes 
also  under  the  form  of  temporary  transfers  to  the 
creditors  of  certain  public  receipts,  are  no  longer 
suited  to  States  which  enjoy  regular  financial  ar- 
rangements, except  in  the  not  unfrequent  case  of 
loans  contracted  for  the  execution  of  public  works, 
and  hence  made  a  charge  on  the  revenue  derived 
from  their  operation.       There  are  also  instances, 


PUBLIC  RECEIPTS  AND   EXPENDITURES.  1 59 

seen  in  recent  times,  when  States  in  contractinof 
loans  have  offered  to  their  creditors  the  formal 
guarantee  of  other  richer  and  more  powerful  States  ; 

2d.  Unsecured  loans,  which  are  based,  merely, 
on  the  personal  credit,  so  to  speak,  of  the  debtor. 

In  respect  to  the  source  of  the  borrowed  capital, 
are  to  be  distinguished  : 

I  St.  Foreign  loans,  the  evidences  of  which  are 
held  by  foreign  capitalists  ; 

2d.  Internal  loans,  the  evidences  of  which  are 
owned  by  home  capitalists. 

Formerly  internal  loans  were  decidedly  preferred 
to  foreign  ones,  because  of  the  fear  entertained 
touching  the  exportation  of  money  caused,  in  the 
latter  case,  by  the  payment  of  interest  and  the  re- 
imbursement of  the  capital.  Now,  however,  for- 
eign loans  are  in  great  favor  because  they  do  not 
deprive  national  industry  of  the  capital  it  requires. 

In  respect  of  the  legal  character  of  the  opera- 
tion, loans  are  divided  into  voluntary  and  forced. 
Forced  loans,  which  form  as  it  were  a  connecting" 
link  between  taxes  and  voluntary  loans,  must  in 
general  be  condemned  both  on  account  of  the  un- 
avoidable injustice  of  their  distribution,  as  also  for 
the  injurious  withdrawal  of  capital  from  private  in- 
dustry which  they  occasion.  They  can  only  be 
admitted  in  cases  of  urgent  need,  arising  under 
circumstances  that  do  not  admit  of  contractinof  a 
voluntary  loan  on  tolerable  conditions. 


l6o         PUBLIC  RECEIPTS  AND  EXPENDITURES. 

In  respect  to  the  manner  of  contracting,  a  dis- 
tinction is  to  be  noted  between  loans  negotiated  : 

I  St.   Directly — that  is,  through  public  agents  ; 

2d.  Indirectly,  through  capitalists  who  interpose 
between  the  debtor  and  the  creditor. 

Finally,  in  respect  of  their  various  methods  of 
arrangement,  particularly  in  respect  of  the  condi- 
tions of  repayment,  we  must  distinguish  between  : 

1st.   Loans  constituting  the  floating  debt; 

2d.  Those  forming  the  consolidated  or  funded 
debt. 


CHAPTER  III. 


FLOATING    DEBT. 


The  floating  (fluctuating,  unfunded)  debt  com- 
prises those  loans  which,  not  being  definitely  regu- 
lated, continually  vary  in  amount. 

In  normal  conditions  the  floating  debt,  which 
often  becomes  an  abuse,  is  distinguished  from  the 
consolidated  debt  by  its  purpose  (which  is  that  of 
filling  a  temporary  deficit  in  the  treasury),  by  the 
shorter  term  of  payment,  and  by  the  power  of 
terminating  it  at  any  time,  which  belongs  to  both 
parties. 

Section  i.     Classification  of  the  fioating  debt. 

The    floating   debt   assumes  various  forms,  the 


PUBLIC  RECEIPTS  AND   EXPENDITURES.  l6l 

more  important  of  which  it  may  be  useful  to  indi- 
cate here. 

Debts  having  their  origin  in  the  carrying  on  of 
State  industries  (running  account,  etc.)  are  now 
unimportant,  both  by  reason  of  their  amount,  and 
because  the  range  of  the  industrial  operations  of 
political  bodies  tends  in  general  to  diminish. 

Debts  arising  in  the  course  of  the  performance 
of  political  functions,  as  deposits  in  court  (which, 
strictly  speaking,  should  not  be  touched),  official 
bonds  (of  accountants,  contractors,  etc.),  the  de- 
posits in  savings-banks,  which  sometimes  are  ad- 
ministered either  directly  by  the  State,  or  indi- 
rectly by  institutions  depending  on  it  (offices  of 
deposit  and  of  loans), — all  these  constitute  a  part 
of  the  floating  debt,  which,  however  (especially  the 
deposits  in  savings-banks),  in  times  of  economical 
and  political  crises  may  cause  serious  embarrass- 
ments. 

Also  accidental  arrears  of  expenses,  caused  by 
postponing  payments  (salaries,  pensions,  interest 
and  annuities,  the  capital  of  matured  loans,  etc.), 
may  sometimes  in  the  larger  States  constitute  a 
not  inconsiderable  class  of  debts,  the  state  of  which 
should  be  always  kept  clear  and  evident  by  means 
of  a  good  system  of  accounts. 

The  more  conspicuous  part  of  the  floating  debt, 
however,  arises  from  large  unforeseen  expenditures, 
from  expenditure  anticipated,  or  by  the  failure  or 


1 62         PUBLIC  RECEIPTS  AND   EXPENDITURES. 

delay  of  the  ordinary  revenues.     Among  these  are 
comprised  : 

I  St.  Loans  of  immediate  payment,  obtained  by 
the  emission  of  convertible  legal-tender  notes 
(paper  money  in  the  improper  sense)  ; 

2d.  Loans  at  very  short  terms  of  payment,  ob- 
tained from  banks,  that  frequently  are  required  to 
make  them  in  return  for  the  privileges  granted  to 
them.  They  consist  of  loans  on  account  current, 
or  in  advances  upon  pledges  of  public  revenue,  or 
of  other  evidences  of  debt ; 

3d.  Interest-bearing  obligations  created  in  order 
to  realize  in  advance  the  revenue  from  future  taxes, 
a  system  which  may  become  dangerous  if  the  obli- 
gations are  continually  renewed  instead  of  being 
extinguished  when  the  need  of  them  has  passed 
away  ; 

4th.  Treasury  notes  or  bonds  (exchequer  bills), 
which  constitute  the  typical  form  of  the  floating 
debt. 

These  consist  of  interest-bearing  obligations  at 
very  short  dates  (as  three,  six,  seven  months, 
a  year),  emitted  by  the  treasury  to  provide 
for  extraordinary  wants  of  the  current  fiscal 
period. 

The  rate  of  interest  on  treasury  notes  is  usually 
very  low  in  rich  countries,  but  it  continually  varies 
according  to  the  conditions  of  the  public  credit 
(the  needs  of  the  debtor,  and  the  confidence  he 


PUBLIC  RECEIPTS  AND   EXPENDITURES.  1 63 

enjoys)  and  those  of  the  money  market  so  called, 
to  wit,  the  quantity  of  loanable  capital. 

Treasury  notes  and  other  analogous  forms  of 
floating  debt,  while  they  afford  to  private  individ- 
uals the  means  of  conveniently  investing  certain 
sums  that  are  for  the  moment  disengaged  and  held 
in  the  expectation  of  better  employment,  are  useful 
and  even  necessary  in  the  best-administered  States, 
which  in  case  of  urgent  need  can  obtain  the  neces- 
sary means  on  easy  terms  from  lenders  who  are  al- 
lured by  the  certainty  of  prompt  repayment,  with- 
out having  recourse  to  the  more  complicated  and 
cumbersome  form  of  consolidated  debt. 

But  treasury  notes  can  certainly  become  a  seri- 
ous abuse  if  allowed  to  grow  beyond  measure  by 
continued  renewals  in  time  of  peace  ;  for  in  times 
of  crisis  they  cause  serious  trouble  by  competing 
injuriously  with  industrial  enterprises,  and  with  in- 
stitutions of  private  credit,  whose  capital  they  ab- 
sorb, and  because,  when  it  is  impossible  to  meet  an 
increasing  and  imperative  demand  for  reimburse- 
ment, resort  is  too  easily  had  to  the  calamitous  ex- 
pedient of  legal-tender  notes. 

The  use  of  treasury  notes  should  therefore  be 
confined  within  narrow  limits,  rigorously  fixed  by 
the  law,  and  the  administration  must  be  prudent 
and  be  guided  by  the  rules  that  are  usually  fol- 
lowed by  the  best- regulated  institutions  of  private 
credit. 


164         PUBLIC  RECEIPTS  AND  EXPENDITURES. 

Sec.   2.    Paper  money. 

To  the  floating  debt  belongs  also  paper  money, 
endowed  with  the  privilege  of  forced  circulation,  by 
which  everybody  is  compelled  to  receive  it  in  pay- 
ment without  the  right  to  immediate  reimburse- 
ment in  metallic  money  (inconvertibility). 

In  a  financial  sense  inconvertible  paper  money  is 
a  forced  non-interest-bearing  loan  made  by  the 
State,  with  an  uncertain  and  indefinite  term  of  pay- 
ment, and  distributed  among  citizens  without  any 
regard  to  their  economic  condition. 

Paper  money  is  one  of  the  most  ruinous  expedi- 
ents to  which  the  public  finances  resort  in  moments 
of  grave  emergency,  when  an  increase  of  taxation 
seems  to  be  impossible  and  when  it  is  desired  to 
avoid,  in  whole  or  in  part,  the  high  rate  of  interest 
which,  under  such  conditions,  must  be  paid  on  a 
voluntary  loan. 

Paper  money,  the  value  of  which  is  inevitably 
liable  to  strong  and  continual  variations,  because 
it  is  generally  issued  by  weak  governments  and  to 
an  excessive  amount,  so  as  to  cause  the  expulsion 
of  metallic  money,  besides  presenting  very  serious 
economic  inconveniences,  damages  the  treasury 
itself  in  its  purchases  at  home  and  abroad,  decreases 
the  income  from  taxes,  and  gives  a  great  shock  to 
the  public  credit,  the  evidences  of  which  fall  in 
value  when  the  interest  is  paid  in  paper,  while  new 
loans   that  may  eventually  become  necessary  can 


PUBLIC  RECEIPTS  AND  EXPENDITURES.  1 65 

only  be  negotiated  on  conditions  that  grow  con- 
stantly worse."^' 

The  withdrawal  of  paper  money  must  be  effected 
resolutely,  but  with  all  the  caution  necessary  to 
avoid  or  at  least  diminish  new  economic  perturba- 
tions of  an  effect  the  reverse  of  those  that  took 
place  at  its  introduction. 

When  the  paper  money  has  not  been  too  greatly 
depreciated  it  seems  more  just  and  convenient  that 
its  withdrawal  should  take  place  at  its  nominal 
value  (at  par),  thus  avoiding  the  injustice  of  giving 
it  a  less  value  than  that  of  its  original  issue.  Still 
it  is  due  to  the  tax-payers,  who  have  to  furnish  the 
necessary  means  toward  the  re-establishment  of 
the  normal  circulation,  that  the  process  should  be 
slow,  in  order  to  diminish,  if  possible,  the  fluctua- 
tions of  the  premium  and  the  speculations  of  the 
last  holders  of  paper  money,  as  well  as  to  obtain 
the  gradual  rise  of  the  current  value  of  the  paper 
until  perfect  coincidence  with  its  nominal  value  is 
secured. 

Bank-notes  are  relatively  less  injurious  than  gov- 
ernmental   paper    money — that    is,  bank-notes  is- 

*  Mr.  H.  C.  Adams,  in  his  very  valuable  work  on  Public  Dehts  (p.  I3it, 
shows  that  the  cost  to  the  tax-payers  of  our  late  war  was  swelled  by  the  enor- 
mous sum  of  $869,000,000  by  bad  methods  of  financiering,  in  which  depre- 
ciated paper  money  bore  a  very  large  part.  This  sum  is  the  difference  be- 
tween the  face  value  of  the  obligations  issued  and  the  gold  value  received  by 
the  Treasury,  and  is  about  equal  in  amount  to  the  bonds  now  outstanding 
less  cash  in  the  Treasury. — Ed. 


l66         PUBLIC  RECEIPTS  AND  EXPENDITURES. 

sued  by  an  institution  of  credit,  to  which  the  State 
concedes  the  privilege  of  legal  tender  (forced  cur- 
rency, cotirs  force),  in  compensation  for  a  loan 
made,  either  gratuitously  or  at  very  low  interest, 
of  a  part  of  its  notes.  The  reason  of  this  is  be- 
cause such  notes  have  a  double  guarantee,  the  prin- 
cipal one  of  the  bank,  and  the  subsidiary  one  of 
the  government,  and  because,  also,  this  system  af- 
fords greater  resistance  to  the  over-issue  of  paper 
money. 


CHAPTER  IV. 

CONSOLIDATED     DEBT. 

The  debt  which  is  called  consolidated  (funded) 
comprises  loans  which  have  been  definitely  regu- 
lated, and-  the  service  of  which  (interest  and 
redemption)  figures  among  the  ordinary  debits  of 
the  balance-sheet. 

The  consolidated  debt  of  the  State  is  also  some- 
times called  inscribed  debt,  because  its  accounts 
have  been  registered  in  the  so-called  Ledger 
(Great  Book)  of  the  Public  Debt. 

The  consolidated  debt  is  divided  into  redeemable 
and  irredeemable. 

Section  i.     Redeemable  debt. 

The  redeemable  debt  comprises  loans  which  the 
debtor  has  obligated  himself  to  repay,  entirely  or 


PUBLIC  RECEIPTS  AND   EXPENDITURES.  1 67 

partly,  at  certain  periods,  and  under  certain  rules 
previously  stipulated. 

Such  an  obligation  does  not,  ordinarily,  at  least, 
exclude  the  right  of  returning  the  capital  before 
the  stipulated  time  by  purchasing  at  market  price 
the  securities  that  represent  it. 

The  redeemable  debt,  by  assuring  repayment  to 
the  lender,  frequently  secures  better  conditions  for 
the  borrower,  and  incites  the  latter  to  economy  in 
order  that  he  may  have  the  required  means  in 
hand  when  payment  is  due. 

This  form  of  loans,  however,  is  not  the  most 
acceptable  either  to  the  lenders,  who  prefer  to 
make  permanent  investments  of  their  capital,  or  to 
those  who  desire  to  speculate  on  the  changing  price 
of  the  securities,  and  who  accordingly  prefer  those 
liable  to  more  frequent  changes  of  value.  On  the 
other  hand,  political  bodies  which  possess  a  high 
credit  can  find  money  on  good  terms  even  by  means 
of  an  irredeemable  debt,  whilst  those  with  inferior 
credit,  and  in  hard  times  even  the  former,  will  be 
obliged  later  to  contract  new  loans  on  worse  terms, 
in  order  to  extinguish  the  old  ones. 

Redeemable  debts  comprise  various  kinds  of 
loans,  distinguished  by  the  various  conditions  of 
repayment.  The  principal  ones  are  those  with 
fixed  terms  of  payment,  prize  loans  and  annu- 
ities. 

In  loans  at  fixed  terms  of  payment,  the   interest 


1 68  PUBLIC  RECEIPTS  AND  EXPENDITURES. 

is  paid  regularly  and  the  principal  at  one  or  more 
fixed  periods.  This  may  also  be  done  by  dividing 
the  several  obligations  into  series,  and  by  drawing 
lots  for  those  to  be  paid  off. 

In  prize  loans,  or  lottery  loans,  which  are  sus- 
ceptible of  the  most  various  combinations,  the  cap- 
ital is  repaid  at  fixed  predetermined  periods  and 
by  lot,  with  the  difference  that  the  interest  (either 
the  whole,  or,  more  often,  a  part  of  it)  is  not  paid 
regularly,  as  in  the  case  of  other  loans,  to  all  the 
holders  of  the  obligations,  but  is  distributed  to 
those  among  them  who  hold  the  particular  ones 
whose  numbers  are  drawn  by  lot. 

These  loans  present,  although  in  much  less 
degree  (as  only  the  interest  or  part  of  the  interest 
is  gambled  for),  the  objections  which  make  against 
lotteries.  They  tend  to  divert  people  from  the 
legitimate  rewards  of  labor  and  of  saving,  arousing 
the  hope  of  considerable  and  exceptional  gain  due 
to  the  favors  of  fortune  ;  they  are,  moreover,  of 
little  advantage  to  the  debtor,  who  is  unable,  under 
such  a  system,  to  secure  the  general  co-operation 
of  serious  capitalists,  and  must  also  forego  the 
eventual  benefit  of  conversion  (refunding),  by 
which  he  might  extricate  himself  in  times  of  pros- 
perity from  the  oppressive  conditions  to  which  he 
had  submitted  at  a  time  of  crisis. 

In  the  system  of  annuities,  also  called  termina- 
ble rentes,  the  capital  is  reimbursed,  little  by  little, 


PUBLIC  RECEIPTS  AND  EXPENDITURES.  169 

by  paying  every  year  a  fixed  sum,  which  com- 
prises the  interest  and  a  portion  of  the  principal, 
which  gradually  increases. 

Annuities  may  be  for  a  fixed  time  or  for  life. 

In  annuities,  at  fixed  time  (as  of  30,  50,  90 
years),  the  amount  of  principal  can  be  exactly 
determined,  which,  added  to  the  interest,  consti- 
tutes the  sum  to  be  paid  annually. 

In  life-annuities,  both  the  period  of  reimburse- 
ment and  the  amount  to  be  reimbursed  are  con- 
tino-ent,  uncertain  elements,  which  depend  on  the 
greater  or  less  duration  of  the  lives  of  one  or  more 
persons,  usually  upon  the  life  of  the  creditors. 

In  simple  life-annuities  the  debt  is  extinguished 
by  the  death  of  the  creditor  ;  in  the  tontine, 
which  consists  of  a  society  of  creditors,  the  debt 
is  not  extinguished  until  the  death  of  the  last 
creditor,  the  condition  being  that  the  survivors 
shall  receive  the  annuities  which  would  have  be- 
longed to  the  other  creditors  had  they  lived. 

Against  the  policy  of  fixed-time  annuities,  still 
in  much  favor  in  certain  countries  which  are  in 
good  financial  condition,  it  is  to  be  observed  that 
they  encourage  the  conversion  of  capital  into  tem- 
porary income,  and  encourage  unproductive  con- 
sumption rather  than  production ;  whilst  in  hard 
times  the  gradual  reimbursement,  both  in  this  and 
in  other  forms  of  redeemable  debt,  is  only  nom- 
inal, since  new  loans  must  be  negotiated,  and  not 

8 


I/O         PUBLIC  RECEIPTS  AND   EXPENDITURES. 

always  advantageously,  to  obtain  the  means  of 
paying  the  old  ones. 

Against  life-annuities  (and  especially  against 
tontines)  not  only  may  the  same  objections  be 
made  that  are  advanced  on  moral  and  material 
grounds  against  annuities  in  general,  but  also 
those  that  are  made  against  the  lottery  loans.  It 
is  also  to  be  noted  that  the  embarrassments  are 
much  greater  than  those  proceeding  from  fixed- 
time  annuities,  because  a  higher  rate  must  be  paid 
for  the  relatively  short  duration  of  the  probable 
life  of  the  creditors  than  is  paid  in  the  case  of  an- 
nuities running  for  a  long  term.  For  this  reason 
life-annuities,  as  a  form  of  public  loans,  are  every 
day  becoming  more  rare. 

Sec.  2.    h'-redeemable  debt. 

Irredeemable  debt,  which  in  present  extent  far 
surpasses  the  redeemable,  comprises  loans  for 
which  the  debtor  (almost  always  the  State)  as- 
sumes only  the  obligation  of  punctual  payment  of 
the  interest  to  the  holder  of  the  securities.  But 
the  debtor  is  not  deprived  of  the  right  of  paying 
off  the  principal  by  purchase  at  market  price  ;  for 
it  seems  repugnant  to  common  sense  that  a  debtor 
should  obligate  himself  never  to  extinguish  his 
debt. 

The  irredeemable  debt  is  acceptable  to  the 
debtor,  because  its  administration  is  more  simple, 
and  because  it  frees  him  from  the  obligation  to  re- 


PUBLIC  RECEIPTS  AND   EXPENDITURES.  I /I 

imburse  the  capital,  which  is  often  embarrassing 
and  onerous.  It  is  also  acceptable  to  the  creditor 
himself,  because  in  the  better  class  of  irredeemable 
debt  he  finds  a  safe  investment ;  because  he  avoids 
the  untimely  and  often  unexpected  reimbursement 
of  the  redeemable  debt ;  and  because  he  is  not  led 
into  a  trap  by  the  bait  of  a  premium,  and  because 
in  any  event,  by  selling  his  obligation  on  the  Ex- 
change at  an  opportune  time,  he  can  recover  his 
capital. 

Perpetual  rente,  namely,  the  interest  charge  of 
an  irredeemable  debt,  has  its  origin  in  two  differ- 
ent methods,  and  hence  comprises  two  forms  of 
loans,  which  dispute  the  field,  both  in  theory  and 
in  practice. 

In  the  first  system  the  debtor  indicates  in  his 
obligations  the  exact  amount  of  capital  received 
and  the  corresponding  interest,  whence  (in  the 
very  act  of  stipulation)  there  is  a  coincidence  be- 
tween the  principal  sum  and  the  nominal  and  real 
interest.  This  does  not  prevent  the  coincidence 
from  disappearing  afterward.  If,  for  instance,  a 
loan  of  100,000,000  francs  is  made  at  8  per  cent., 
and  later  the  securities  rise  to  120  or  fall  to  80,  the 
real  interest  in  the  former  case  will  be  reduced  to 
6f,  and  in  the  latter  will  rise  to  10  per  cent. 

This  is  the  most  ancient,  simple,  and  honest 
form  of  using  the  public  credit  ;  and  it  does  not 
close  the  door  to  repayment,  for  in  case  of  an  im- 


1/2  PUBLIC  RECEIPTS  AND  EXPENDITURES. 

proved  condition  of  the  public  credit  no  difficulty 
can  arise  from  having  acknowledged  a  greater  debt 
than  the  capital  received. 

In  the  second  system,  the  debtor  calculates  the 
interest,  not  in  relation  to  the  capital  which  he  has 
obtained,  but  in  relation  to  a  nominal  capital,  in- 
dicated in  the  obligations,  and  which,  as  a  rule,  is 
greater  than  the  amount  actually  received.  There 
is,  therefore,  at  the  time  of  borrowing  a  dispropor- 
tion between  the  interest  and  the  principal,  nom- 
inal and  actual.  If,  for  instance,  securities  of  lOO 
francs  are  put  into  circulation,  bearing  the  nomi- 
nal interest  of  5  per  cent.,  but  for  which  only  6\ 
francs  has  been  received,  the  real  interest  will  be  8 
per  cent. 

This  method,  first  practiced  in  England  and  later 
common  in  other  States,  enjoyed  for  a  time  the 
highest  favor  among  theorists  because  it  produces 
a  saving  in  interest ;  it  simplifies  the  administra- 
tion and  does  not  multiply  the  classes  of  loans  ;  it 
puts  into  circulation  securities  that  are  most 
sought  after  by  speculators,  as  more  adapted  to  the 
speculative  combinations  of  the  Exchange,  and  less 
liable  to  the  eventualities  of  future  conversions,  in 
which  the  State  would  be  obliged  to  repay  a  greater 
capital  than  had  been  received. 

Now,  however,  the  contrary  opinion  prevails 
among  writers,  because  the  difficulty  of  the  con- 
version  is  reputed   an  injury   rather   than   an   ad- 


PUBLIC  RECEIPTS  AND   EXPENDITURES.  1/3 

vantage,  whilst  the  probable  rise  of  the  market 
price  closes  the  door  to  redemption  ;  and  because 
it  is  not  always  true  that  the  loss  which  the  State 
suffers  by  the  increase  of  the  nominal  capital  is 
compensated  by  the  advantage  derived  from  a  sav- 
ing in  the  interest. 


CHAPTER    V. 

ADMINISTRATION    OF    THE    PUBLIC    DEBT. 

The  most  important  questions  in  regard  to  the 
administration  of  the  public  debt  relate  to  the  ne- 
gotiation, extinction  and  conversion  of  loans. 

Section   i.    Negotiation. 

Public  loans  may  be  negotiated  directly,  that  is, 
between  the  debtor  and  the  creditor,  or  indirectly 
by  the  assistance  of  intermediaries. 

Direct  negotiation  may  be  made  either  by  sell- 
ing new  obligations  on  the  Exchange,  or  by  open- 
ing a  public  subscription. 

The  former  method,  which  is  not  applicable  ex- 
cept in  small  amounts,  causes  the  debtor  and  his 
agents  to  join  in  a  speculation,  and  too  easily  lends 
itself  to  illegal  issues. 

By  the  method  of  public  subscription,  namely,  of 
loans  that  are  sometimes  called  national  and  pa- 
triotic, the  debtor  announces  the  conditions  of  the 


174  PUBLIC  RECEIPTS  AND  EXPENDITURES. 

loan  (the  price  and  interest)  ;  he  receives  all  th<i 
subscriptions  offered  which  do  not  exceed  a  certain 
minimum  ;  he  reduces  them  in  case  of  excess  of 
offerings  either  proportionally  or  with  a  prefer- 
ence in  favor  of  the  smaller  subscriptions. 

This  system,  which  for  a  quarter  of  a  century 
has  prevailed  in  France,  dispenses  with  the  always 
onerous  co-operation  of  intermediaries  ;  it  avails 
itself  of  the  patriotism  of  the  citizens,  and,  as  ex- 
perience has  proved,  it  is  fertile  of  the  best  results 
in  countries  which  have  abundant  capital,  and 
where  the  purpose  of  the  loan  is  not  only  of  real 
utility,  but  is  also  generally  appreciated. 

In  default  of  such  conditions,  the  gain  obtained 
by  the  saving  of  the  cost  of  intermediaries  is  over- 
balanced by  the  injury  suffered  by  industry,  which 
the  competition  of  loans  at  a  high  rate  of  interest 
deprives  of  a  part  of  the  capital  which  it  needs. 
Sometimes,  however,  the  splendid  result  of  such 
loans  is  in  part  at  least  more  apparent  than  real, 
because  speculation  can  hardly  be  avoided,  the 
banking-houses,  of  course,  ranking  foremost  and 
strongest  among  the  subscribers. 

In  the  case  of  loans  negotiated  through  interme- 
diaries the  obligations  are  sold  to  them  wholesale, 
and  they  sell  again  at  retail  in  the  hope  of  gaining 
a  difference  in  price. 

The  intervention  of  bankers  is  necessary  when 
the  conditions  of  success  by  public   subscriptions 


PUBLIC  RECEIPTS  AND   EXPENDITURES.  I  75 

are  wanting,  and  is  especially  useful  when  capital 
is  found  in  large  aggregations  which  are  in  great 
part  foreign.  Still,  it  is  certain  that  operations 
tending  to  cause  a  rise  of  the  price  of  the  securi- 
ties result  in  general  to  the  injury  of  bona-fide  in- 
vestors. 

When  resort  is  had  to  intermediaries  the  debtor 
may  apply  at  once  to  single  banking-houses,  in 
which  he  has  confidence,  after  obtaining  the  neces- 
sary information  and  appropriate  guarantees,  or  he 
can  put  up  the  loan  at  auction,  handing  it  over  to 
the  one  who  makes  the  most  advantageous  offer 
coupled  with  the  required  security. 

By  auction  sale  the  benefits  of  competition  are 
obtained  as  well  as  of  publicity,  and  the  suspicion 
of  favoritism  and  of  venality,  on  the  part  of  the 
agents  charged  with  the  negotiation  of  the  loan,  is 
at  least  in  part  avoided.  But  it  is  a  system  which 
does  not  always  yield  good  results,  especially  in 
poor  countries,  in  hard  tim.es  and  in  case  of  urgent 
needs. 

Public  securities  are  made  payable  either  to 
order  or  to  bearer.  The  latter  class,  by  reason  of 
the  greater  ease  of  transfer,  are  now  preferred  to 
the  former,  which,  however,  by  reason  of  the 
greater  security,  are  especially  suited  to  minors,  and 
in  general  to  trusts,  and  to  persons  under  bonds  to 
the  public  authorities. 

The  payment  of  the  interest  should  be  punctual 


1/6  PUBLIC  RECEIPTS  AND  EXPENDITURES. 

and  convenient  to  the  parties  as  to  time,  place  and 
manner.  It  is  sometimes  made  by  means  of  cou' 
pons,  which  are  detached  from  the  obHgations,  and 
which  indicate  the  number,  the  date  and  maturity, 
and  the  amount  to  be  paid.  When  one  sheet  of 
coupons  is  exhausted  another  is  furnished  on  the 
presentation  of  the  original  obligation,  or  a  certifi- 
cate (talon)  annexed  to  the  same. 

Sec.   2.    Extiiictioii. 

The  public  debt  may  be  extinguished  in  two 
ways,  one  illegal,  by  which  the  debtor  disengages 
himself  arbitrarily  from  his  responsibilities  by  a 
total,  open  or  disguised  bankruptcy,  sacrificing  the 
rights  of  his  creditors  to  the  convenience  of  the 
tax-payers  ;  the  other  legal,  by  which  the  debtor 
pays  his  obligation  in  whole  or  in  part,  and  does  so 
in  the  manner  provided  by  the  conditions  explicitly 
or  impliedly  agreed  upon  with  his  creditors. 

The  gradual  and  systematic  extinction  of  the  pub- 
lic debt  raises  the  credit  of  the  State  and  improves 
its  financial  condition  ;  it  permits  the  reduction  of 
taxes  or  the  incurring  of  fresh  expenses,  and  it 
facilitates  the  negotiation  of  new  loans  should  the 
occasion  for  them  arise. 

Yet  this  extinction  is  not  useful  if  it  is  not  real 
but  only  apparent.  To  this  end  the  actual  surplus 
of  receipts  over  expenditures,  and  the  proceeds  of 
the  sales  of  public  property  made  at  opportune 
times,  should  be  applied.     On  the  other  hand,  it 


PUBLIC  RECEIPTS  AND  EXPENDITURES.  1 77 

will  prove  of  no  avail  to  increase  the  burden  of 
taxes,  or  to  contract  new  loans  on  hard  conditions 
in  order  to  pay  off  old  ones. 

There  are  also  conclusive  objections  to  a  system, 
which  has  found  some  supporters,  of  converting  the 
public  debt  into  a  private  debt,  by  apportioning  it 
amono'  the  contributors  accordino^  to  their  total 
property,  or  in  proportion  to  their  landed  property. 
Neither  extraordinary  imposts  nor  voluntary  sub- 
scriptions avail  for  this  purpose ;  because  they  re- 
solve themselves  into  expedients  either  contrary  to 
equity  or  practically  illusory  or  at  least  insufficient, 
and  because  on  the  most  favorable  hypothesis  they 
would  produce  a  merely  nominal  conversion  of  the 
debt,  accompanied  by  a  very  serious  crisis,  and  by 
an  enormous  displacement  of  capital. 

Nor  have  the  so-called  "  sinking  funds,"  with  a 
separate  administration,  and  an  annual  charge  for 
their  benefit  inserted  in  the  budget,  answered  the 
expectations  that  were  entertained  at  the  begin- 
ning. Created  for  the  purpose  of  gradually  extin- 
guishing the  public  debt,  by  the  purchase  of  obli- 
gations in  the  open  market,  they  take  advantage 
of  compound  interest ;  by  applying  to  such  pur- 
chases, also,  the  progressively  increasing  yield  of 
the  securities  so  held,  until  the  moment  when  the 
destruction  of  them  becomes  possible  through  the 
redemption  of  all  the  obligations. 

The  complexity  of  the  system,  the  expenses,  the 

8* 


1/8  PUBLIC  RECEIPTS  AND  EXPENDITURES. 

application  of  the  funds  for  other  uses,  which  is 
inevitable  in  economic  or  political  crises,  and  the 
need  of  fresh  loans,  have  almost  always  neutralized 
the  advantages  that  were  expected  to  result  from 
this  much-extolled  automatic  extinction  of  the  pub- 
lic debt. 

Sec.   3.     Conversion. 

The  conversion  of  the  public  loans  may  be 
either  forced  (and  hence  illegal)  or  voluntary,  and 
may  refer  to  the  kind  of  debt  (conversion  of  float- 
ing into  funded  debt,  etc.)  as  well  as  to  the 
amount ;  it  usually  refers  to  the  interest,  and  hence 
it  is  called  "  conversion  of  the  rente." 

In  the  conversion,  the  debtor  offers  to  his  credi- 
tors the  alternative  of  a  reduction  of  interest  or 
the  repayment  of  the  principal. 

This  operation,  which  some,  especially  in  the 
past,  considered  contrary  to  equity,  is  now  ap- 
proved of  by  the  majority  of  writers,  because  the 
State  impliedly,  if  not  always  explicitly,  reserves  to 
itself  the  right  of  paying  at  pleasure  the  principal 
of  its  debts,  and  because  it  is  the  duty  of  the  State 
to  enable  the  tax-payers  to  share  in  the  improved 
economic  and  financial  conditions,  which  actually 
cause  the  rise  in  the  market  price  of  public  securi- 
ties, and  the  fall  of  the  rate  of  interest  on  private 
loans. 

Conversion  will  only  be  successful  when  the 
majority  of  the  creditors,  failing  to  find  safer  or 


PUBLIC  RECEIPTS  AND  EXPENDITURES.  1/9 

more  profitable  investments  in  private  industry, 
prefer  the  reduction  of  interest  to  the  repayment 
of  the  principal.  Such  a  state  of  affairs  presup- 
poses a  condition  of  great  economic  and  financial 
prosperity,  and  the  existence  of  public  loans  con- 
tracted at  par,  or  not  far  below  par,  and  which  may 
therefore  rise  in  the  market  to  such  a  point  that 
the  conversion  is  rendered  practicable.* 


*  The  annual  interest  charge  on  the  pubHc  debt  of  the  United  States  in 
the  year  1865,  when  the  debt  had  reached  its  maximum  (|2, 381,000,000), 
was  $151,000,000.  The  present  charge  is  about  $40,000,000,  on  about 
$1,000,000,000  of  principal.  As  58  per  cent,  of  the  debt  has  been  re- 
deemed, it  appears  that  of  the  reduction  of  $111,000,000  in  the  annual  in- 
terest charge,  $64,380,000  is  in  consequence  of  payments  of  the  principal, 
and  $46,620,000  is  due  to  conversions.  Among  the  documents  embraced 
in  the  census  of  1880  is  a  compilation  of  The  National  Loans  of  the  United 
States,  from  July  4,  1776,  to  June  30,  1880,  by  Rafael  A.  Bayley.  The 
successive  conversions  of  the  public  debt  are  there  given  in  detail. — Ed. 


BIBLIOGRAPHY    OF    THE    SCIENCE    OF    THE 

FINANCES. 

PART  I. 

GENERAL   WORKS. 
SECTION    I. 

Histories  of  the  Science  of  the  Finances. 

J.    Kautz.     Die   geschichtliche    Entwickelung    der   National    Oekonomik. 

Vienna,  i860. 
L.  Cossa.     Introduzione  alio  Studio  dell'  Economia  Politica.     3d  edition. 

Milan,  1878. 
M.  Colmeiro.     Historia  de  la  Economia  Politica  en  Espana.     Madrid,  1863, 

2  vols. 
W.  Roscher.     Geschichte  der  National  Oekonomik  in  Deutschland.    Munich, 

1874. 
G.  Ricca-Salerno.    Storia  delle  Dottrine  Finanziarie  in  Italia.    Rome,  1881. 
In  the  Memorie  delta  R.  Accad.  dei  Lincei. 

SECTION  II. 

Treatises  and  Compendiums  of  Political  Economy. 

See  the  works  cited  by  L.  Cossa,  Primi  Element i  di  Economia  Politica. 
8th  edition.     Milan,  18S7.     Appendix. 

SECTION  III. 
Treatises  and  Compendiums  of  the  Science  of  the  Finances. 

Chapter  I. 

English  and  French   IVorks. 

J.  R.  McCuUoch.  A  Treatise  on  the  Principles  and  Practical  Influence  of 
Taxation  and  the  Funding  System.     London,  3d  edition,  1863. 

J.  Gamier.  ^Uments de  Finances.  Paris,  1856.  4th  edition  with  the  title: 
Traitif  de  Finances.     Paris,  1882. 


1 82  BIBLIOGRAPHY  OF  FINANCE. 

R,  Gandillot.     Principes  de  la  Science  des  Finances.     Paris,  1874.   3  vols. 
P.  Leroy-Beaulieu.      Traitt^  de  la  Science  des  Finances.     3d  edition.     Paris, 
1883.    2  vols. 

Chapter  II. 

German  Works. 

L.  V.  Jakob.     Die  Staatsfinanzwissenschaft.     Halle,  2d  edition,    1837.     2 

vols. 
C.  A.  V.  Malchus.      Handbuch  der  Finanzwissenschaft.     Stuttgart,  1830.    2 

vols. 
K.    H.    Rau.      Grundsatze  der  Finanzwissenschaft.     Leipsic,    5th    edition, 

1864-65.    2  vols. 
L.  V.  Stein.     Lehrbiich  der  Finanzwissenschaft.     Vienna,  Sth  edition  in  4 

vols.,  1885-1886. 
K.  Umpfenbach.     Lehrbuch  der  Finanzwissenschaft,  Erlangen,  1859-1860. 

2  vols. 

C.  V.  Hock.     Die  Offentlichen  Abgaben  und  Schnlden.     Stuttgart,  1863. 
Ad.  Wagner.     Finanziuissenschaft.     Vol.   I.     Leipzig,   1871-72.     (3d  edi- 
tion, 1883.)     (Vol.  II.,  1878.)     (Vol.  III.,  1886-87.) 

G.  Schonberg.  Handbuch  der  Politischen  Oekonomie.    2d  edition,  Tiibingen, 

1886. 
W.  Roscher.      System  der  Finanzwissenschaft.     Stuttgart,  1886. 

Chapter  III. 

Italian    Works. 

P.  de  Luca.      La  Scienzadelle  Finanze.     Naples,  1858. 
A.  Marescotti.     Le  Finanze,  etc.     Bologna,  1S67. 

D.  Zeppa.     La  Scienza  Finanziaria,  etc.     Florence,  1870. 

G.  Giovanelli.     Delia  Scienza  Finanziaria,  etc.     Vol.  I.  Rome,  1877. 

E.  Morpurgo.     La  Finanza.     Florence,  1877. 

G.   Boccardo.     /  Principii  della  Scienza  e  dell'  arte  delle  Finanze.     Turin, 
1884. 

F.  Marzano.     Compendio  di  Scienza  delle  Finanze.     Rome,  1886. 

Chapter  IV. 

Works  in  other  Languages. 

J.  Lopez  Narvaez.      Tratado  de  Hacienda  Publica,  etc.     Madrid,  1856. 
J.  M.   Piernas  y  Hurtado.     Manual  de  Instituciones  de  Hacienda  Publica 
Espanola.     2  vols.     Madrid,  3d  edition,  1885. 


BIBLIOGRAPHY   OF  FINANCE.  183 

A.  dos  Sanctos  Pereira  Jardim.     Principios  de  Financas.     Coimbra,  3d  edi- 
tion, 18S0. 
F.  Gorloff.     Theory  of  the  Finances  iyt\.'R.\i.s%\'!iXi).     St.  Petersburg,  1875. 

F.  Skarbek.     Principles  of  the  Science  of  the  Finances  (in  Polish).     War- 

saw,  1824. 
L.  Bilinski.     System  of  the  Science  of  the  Finances  (in  Polish).     Lemberg, 

1S76. 
V.  Mariska.     Science  of  the  Finances  {}n  'Rnwgmz.VL).     Buda-Pesth,  1871. 
S.    Mattlekovits.      Science   of  the  Finances  (in  Hungarian).     Buda-Pesth, 

1876. 
J.  Kautz.     Science  of  the  Finances  {m  YivLXigZLTiciVL),     Buda-Pesth,  1885. 

G.  Sographos.     Science  of  the  Finances  (in  Greek).     Vol.  I.     Athens,  1882. 

SECTION  IV. 

Financial  History,  Statistics,  atid  Legislation. 

See  the  works  cited  by  Ad.  Wagner,  Finanzwissenschaft.  2d  edition.  Vol.  I. 
Leipzig,  1877  ;  pp.  54-59. 

J.  Canga-Arguelles.  Diccionario  de  Hacienda  con  aplicacion  a  Espaiia.  2 
vols.     London,  1826.     Madrid,  1833-34. 

J.  Lopez  Juana  Pinilla.  Biblioteca  de  Hacienda  de  Espaiia.  6  vols.  Mad- 
rid, 1840-48. 

L.  Ovila  y  Canales.     Diccionario  de  Hacienda  Publica.     Santiago,  1880. 

PART   II. 

SPECIAL   WORKS. 

SECTION  I. 

Public   Expenditures. 

V.  Czornig.     Das  osterreichische  Budget.     2  vols.     Vienna,  1862. 

Ad.  Wagner.      Ordnung  des  Osterr  Stattshaushalts.     Vienna,  1863. 

Ed.  Pfeiffer.      Vergleichende  Zusamtnenstellung  der  Europaischeti  Staatsaus 

gaben.     Stuttgart,  2d  ed.,  1877. 
R.  Gneist.     Budget  und  Gesetz.     Berlin,  1867. 
A.  Salandra.     La  Progressione  dei  Bilanci  negli  Stati  moderni.     Rome,  1879 

(In  the  Archivio  di  Statistica,  3d  year). 
G.  Arcoleo.     //  Bilancio  dello  Stato  ed  il  Sindacato  Parlamentare.     Naples, 

1880. 


l84  BIBLIOGRAPHY  OF  FINANCE. 

M.  Pantaleoni.      Contributo  alia  teoria  del  riparto  delle  spese  pubbliche.     (In 

the  Rassegna  Italiana,  1883.) 
S.  Francone.     II  bilancio,  la  contabilita  generale,  etc.      Naples,  1884. 
D.  A.  Wells,  Stephen  Colwell  and  S.  S.  Hayes,  Commissioners.     Report  of 

the  United  States  Revenue  Commission.     Washington,  1865. 
D.  A.  Wells.     Reports  of  the  Special  Comynissioner  of  the  Revenue.      4  vols. 

Washington,  1866-69. 

SECTION    II. 

Fiscal  Domain. 

See  the  works  cited  by  A.  Wagner,  Finanzwissenschaft.    3d  edition.    Vol.  I. 
Leipsic,  1883,  passim. 

SECTION    III. 

Fees  and  Charges. 

Al.  Meyer.      Ueber  Stempelsteuern.      In  the  Review,  Vierteljakrschtift  fiif 

Volks-wirthschaft.     Vol.  VII.     Berlin,  1864. 
W.  Besobrasoff.      Impots  sur  les  Actes  (in  the  Mem.  de  I'Acad/mie  de  St. 

Petersburg,  1866-67). 
R.  Friedberg.      Ziir  Theorie  der  Stempelsteuern.     {In  the  Jahrbiic her  f.  Na^ 

tionalok.  tmd  Statist.,  1878.) 

SECTION  IV. 

Taxes. 
Chapter  I. 

Taxation  in  General. 

§  I.  English  and  French   Works. 

G.    K.    V.    Hogendorp.     Lettres  sur  la  Prosptfrit/  Publique.     Amsterdam, 

1830.    2  vols. 
H.  Parnell.     Financial  Reform.     London,  1830;  4th  edition,  1832. 

D.  Buchanan.     An  Inquiry  into  Taxation.      Edinburgh,  1844. 

E.  de  Girardin.     De  V Impdt.     Paris,  6th  edition,  1852. 

P.  J.  Proudhon.      Th/otie  critique  de  I'Impot.     Brussels,  2d  edition,  1868. 

L.  Walras.       TMorie  critique  de  I'Impot.   Paris,  1861. 

CI.  Royer.      Th^orie  de  I'Impot  on  de  la  Dime  Sociale.     Paris,  1862. 


BIBLIOGRAPHY  OF  FINANCE.  1 85 

E.  de  Parieu.     Traittf  des  Impots,  etc.    Paris,  5  vols.,  2d  edition  (in  4  vols.), 

1866-67. 
Ed.  Vignes.      Traite  des  Impots  en  France.      Paris,  4th  edition  (in  2  vols.), 

1880. 
A.  Chargueraud.     L'Jiconomie  politique  et  I'lfupSt.     Paris,  1864.      8vo. 
Th.  E.  Cliffe  Leslie.     Financial  A' e/orm.      London,    1872.     (In  the   Cobden 

Club  Essays.     2d  series.) 
V.  Bonnet.     La  Question  des  Impots.      Paris,  1878. 

§  2.    German   JVorks. 

D.  Krehl.  Das  Steuersystem,  etc.     Erlangen,  1816. 

C.  Kroncke.      Ueber  die  Grundsdtze  einer  gerechten  Besteuerung.     Heidel- 
berg, 18 19. 
K,  Murhard.      Theorie  und  Politik  der  Besteuerung.     Gottingen,  1834. 
T.  G.  Hoffmann.     Die  Lehre  von  den    Steuern.     Berlin,  1840. 
H.  L.  Biersack.      Ueber  Besteuerung,  etc.     Frankf.,  a.  m.,  1S50. 
H.  Eisenhart.     Die  Kutist  der  Besteuerung.      Berlin,  1868. 

E.  Laspeyres.     Staatszoirthschaft.     (In  the  Deutsches  Staatsworterbuch  of 

Bluntschli  and  Brater.)  Vol.  X.     Stuttgart,  1867  ;  pp.   71-152. 
C.  Walcker.      Die  Selbstverwaltung  des  Steucrwesens.     Berlin,  i86g. 
H.  Maurus,     Die  moderne  Besteuerung.     Heidelberg,  1870. 

A.  Eb.  Fr.  Schaffle.     Die  Grundsdtze  der  Steuerpolitik.     Tubingen,  1880. 

§  3.   Italian    ll^orks. 

G.  Cridis.      Dei  Ttibuti.     2  vols.      Turin,  1832. 

G.  Borsani.     II  Sistema  dei  Tributi.      Turin,  1850. 

L.  Dufour.     Delle  imposte.     Genoa,  1861. 

C.  Pallavicino.      Teoria  sulle  imposte.     Turin,  1S65.   (From  the  Rivista  con- 

tempo7'anea.  Vol.  XL.) 
M.  Pescatore.     La  Logica  delle  imposte,  etc.      Turin,  1S67. 

B.  Benvenuti.     Le  imposte.      Teoria  e pratica.     Milan,  i86g. 
S.  Zeni.     Le  imposte,  etc.     Ferrara,  i86g. 

C.  Baer.     L'avere  e  I'imposta.      Turin,  1872. 

S.  Francone.      Sulle  gradiuili  rifonne  dei  sistemi  tributarii.     Naples,  1875. 
G.  Alessio.     Saggio  snl  sistema  tribittario  in  Italia.     Vol.  I.     Turin,  1883. 

§  4.    JVorks  in  other  Langtiages . 

F.  Gallardo  Fernandez.     Origen,  progresos  y  estado  de  lasrentas  de  la  corona 

de  Espaiia,  tic.     7  vols.     Madrid,  1806-1832. 


1 86  BIBLIOGRAPHY  OF  FINANCE. 

Tourguenieff.     A71  Essay  on  Imposts  (in  Russian).     St.  Petersburg,  2d  edv 

tion,  i8ig. 
V.    Delecourt.     Disputatio    aconomica-politica    de   tributis    ac   vectigalibus. 

Lou  vain,  1829. 
L.  M.  Pastor.     La  ciencia  de  la  Contribucion.     Madrid,  1856. 
N.   G.   Pierson.     Belasting  naar  den    Welstand.     Amsterdam,    1879.    8vo. 

(From  the  Review  :  De  Gids.) 
N.  G.  Pierson.     Belastinghervorming.     Amsterdam,  1S81.    (Ibidem.) 


Chapter  II. 

Rules  and  Classification  of  Imposts. 

G.  SchmoUer,     Die  Lehre  7Jon  Einkommen  in  ihrem  Zusammenhange  mit 

den  Gratidprincipien  der  Steurelehre   (in  the  Zeitschr.  f.  d.  ges.   Staatsw. , 

1863.) 
G.  Fauveau,       Conside'rations    math^matiques   sur   la    Th/orie   de    I'lmpot. 

Paris,  1864. 
Fr.  J.  Neumann.     Die  progressive  Einkommensteuer,  etc.     Leipsic,  1874. 
H.    V.    Scheel.     Die  progressive  Besteuerung.     (In    the    Zeitschr.  f.  d.  ges. 

Staatsw.,  1875.) 
J.  Lehr.  Krittische  Bemerkungenuber,  etc.    {InXht  Jahrbiicherfilr National- 

okonomie,  1S77.) 
G.  Ricca-Salemo,      Dell  imposta  progressiva,  etc.      (In    the    Giornale  degli 

Economisti,  Padua,  1S78.) 
Ad.  Held.     Zur  Lehre  voti  der  Ueberwdhung  der  Steuren.    (In  the  Zeitschr. 

f.  die  ges.  Staatswiss.,  1868.) 
H.  Schmidt.     Die  Steuerfreiheit  des  Existenzmininius.      Leipsic,  1877. 
Th.  Forstemann.     Die  directen    und  indirecten  Steuern,  etc.      Nordhausen, 

1868. 
Rob.  Meyer.     Die  Ptincipien  der  gerechten  Besteuerung,  etc.     Berlin,  1884, 
J.  Prince-Smith.    Die  Ahwolzung.    Berlin,  1866. 

Jos.  Kaizl.      Die  LeJire  von  der  Uebcrzuolziing  der  Steuern.     Leipsic,  18S2. 
V.  Falck.      Kritische  Ruckblicke  auf  Entwicklung  der  Steueruberwalzungs- 

lehre  seit  Ad.  Smith.      Dorpat,  1882, 
M.  Pantaleoni.      Teoria  della  traslazione  dei  ttibuti.     Rome,  1882. 
Fr.  J.  Neumann.     Dei  Unterscheidung  directer  und  itidirecter  Steuern.     (In 

SchmoW^x,  Jahrbuch,  etc.,  1882.) 


BIBLIOGRAPHY   OF  FINANCE.  1 87 

Chapter  III. 

Particular  Imposts. 

§  I.   Imposts  on  the  Produce  of  Landed  Property. 

E.  Nasse.     Bcmerkungen  iiber  das  prcussiche  Steuersysietn.     Bonn,  1861. 
Fr.  J.  Neumann.    Ertragssteuern  oder  Staatssteuern  ?  etc.     Frieburg  in  Br., 

1876. 
J.    R.    A.    V.    Helferich.     Die  Reform    der   directen    Steuern,  etc.      (In   the 

Zeitschr.  f.  d.  ges.  Staatsw.,  1S73.) 
A.  D.  G.  Coffinieres.     J^tudes   stir  le  Budget  et   spe'cialement  sur   rimp$t 

fancier.     Paris,  1848. 
Kries.      Vorschldge  zur  Regelung  dcr  Grundsteuer,  etc.      Berlin,  1855. 

F.  H.  V.  Noizet.     Du  Cadastre  et  de  la  Delimitation  des  Heritages.     Paris, 

1863. 
Dr.  Vocke.     Uber  Besteiierung  der  Landwirthschaft,  etc.     (In  the  Zeitschr. 

fur  die  ges.  Staatswiss,  1873-74.) 
A.  Scialoja.     Dei  ttibuti  diretti,  etc.     (In  ihe  A'uova  Antologia,  1867-6S.) 
M.  Minghetti.     Dell'  ordinamento  delle  impaste  dirette,&iz.     (Ibidem,  1869.) 
L.  Tegas.     Sulla  pcrequazione  Fandiaria.     Pinerolo,  1875. 

G.  Sonnino.     //  catasto  e  la  perequazione  deh'  imposta  fandiaria.     Florence, 

1875.     8vo. 
A.  Nagorny.     Impots  des  Bdtiments,  etc.     Warsaw,  1865. 
Dr.  Vocke.    Uber  Haiisersteuer,  etc.    (Inihe  Zeitschrift  f.  d.  ges.  Staats7viss, 

1875.) 
K.  Th.  Eheberg.     Die  Revision  der  directen  Steuern.     (In  iht  Jakrbuch  oi 

Schmoller,  1S81.) 
F.   V.    Myrbach.      Die   Besteuerung  dcr    Gebaude    und    Wohnungen,    etc. 

Tubingen,  1886. 
A.  Messedaglia.    Relazione  sul  Titolo  I  del  Progctto  di  Legge  sul  lioj'dina- 

mento  dell'  imposta  fandiaria. 

§  2.   Imposts  on  the  Income  of  Personal  Property. 

E.  Nasse,  A.  Held,  etc.  Die  Personallesteuerung,  Gutachten,  etc.  Leip- 
zig, 1873- 

J.  R.  A.  V.  Helferich.  Uebcr  die  Einfiihrutig  einer  Kapitalsteuerin  Baden. 
(In  the  Zeitschr.  fur  die  ges.  Staatsw.     Tubingen,  1846.) 

Dr.  Vocke.     Kapitalrentenbesteuerung,  etc.     {Ibidem,  1868.) 


1 88  BIBLIOGRAPHY  OF  FINANCE. 

J.  Lehr.     Kapitalisirungsteuer,  Zinsrenstensteuer,  etc.     {^Ibidem,  1877.) 
K.    S.    Zacharia.     Uber  Besoldungsstcuern.     (In   his   Abhundlungen,  etc.) 

Heidelberg,  1835. 
Dr.   Vocke.       Uber  Personalbesteuerung,   etc.      (In  the  Zeitschr.  f.   d.  ges. 

Staatsw.,  1865.) 
C.  H.  L.  Hoffmann.     Die  verschiedenen  methode  der  rationellen    Gewerbebe- 

steiterung.     {Ibidem,  1850.) 
Dr.  Vocke.     Die  Besteuerung  der  Gewerbe  in  England.     {Ibidem,  1862.) 
C.  Dietzel.     Die  Besteuerung  der  Actien-Gesellschaften,  etc.    Cologne,  1859. 

C.  H.  L.  Hoffmann.    Die  Zuldssigkeit  einer  landivirthschaftlichen  Gewerbe- 

besteiier,  etc.     (In  the  Zeitschr.  f.  d.  ges.  Staatswiss,  1884.) 

D.  A.  Wells.     Edwin    Dodge  and  Geo.  W.   Cuyler,  Commissioners.     Re- 

ports   on     Taxation    in    the    State  of  New    York.     2  vols.     Albany, 
1870-1871. 

§  3.   Imposts  on    Transfe7-s  of  Property. 

C.  V.  Czornig.     Die  Algaben  von  der  Ubertragung  unbeweglichen  Eigen- 

thums,  etc.     Trieste,  1869. 
C.  V.  Czornig.     Die  Besteueru7ig  der  Wechsel,  etc.     Trieste,  1870. 
G.  A.  Nahuys.     De  Belasting  op  de  erfopvolging.     Utrecht,  1869. 
H.  V.  Scheel.     Erbschaftssteiiern  und  Erbrechtsreform.     Jena,   2d  edition, 

1877. 
J.  Baron.     Zur  Erbschaftssteuer.     {\x\  \.\\q  Jahrbiicher  fur  National  Oekono- 
mie,  1S76. ) 

E.  Leser.    Die  Britische  Erbsckaftsbesteuerung.    {In  the  Zeitschr.  f.  die  ges. 

Staatswiss,  1881.) 
H.    Geffcken.    Erbrecht   und  Erbschaftssteuer.     (In    the  Jahrbiicher  fiir 
Gesetzelbung,   Verwaltung    und    Volkswirthschaft,    by    G.    Schmoller, 
1881.) 

§  4.   Imposts  on  Consutnption. 

E.  Eschenmeyer.       Ueber  die  Consumtionssteuer.     Heidelberg,  1813. 
Ferd.  Lassalle.     Die  indij-ecte  Steuer  und  die  Lage  der  arbeitenden  Klassen. 

Zurich,  1863. 
J.  H.  Geffcken.     Die  Reform  der  Reichssteuern,     Heilbronn,  1879. 
S.  G.  Kerst.     Das  Salzmonopol,  etc.     Berlin,  1865. 
A   Schmidt.     Das  Salz,  etc.     Leipzig,  1874. 
C.   H.  F.  Hoffmann.      Die  angemessene  Besteueiung  des    Tabakgenusses. 

(In  the  Zeitschr.  f.  d.  ges.  Staatsiuiss,  1S52.) 


BIBLIOGRAPHY  OF  FINANCE.  1 89 

D.  J.  Creizenach.     Die  franzosische  Tabakregic.     Mainz,  1868. 

J.  Maehrlen.      Die  Bestenerung  des  Tabaks,  etc.     Stuttgart,  1868. 

J.  Pierstorff.    Altcre  unci  neuere  Litteratiir  zur  Frage  der  Tabaksbesteuering, 

etc.      {}.\\  X\\Q  Jarhbiicher  fit}-  Nationalokonoijiic.     Jena,  1878-79.) 
C.  J.  Petitti.     Del  Gitwco  del  Lotto,  etc.     Turin,  1853. 
O.    Wolff.      Die  Mahl-  und  Schlachtsteuer.     (In     the     Vierteljahrschr.   f. 

Volks-wirths.,  Berlin,  1S64.) 

F.  Ferrara.     La  tassa  sul  Macino,  etc.     Florence,  1865. 

P.  Molroguier.     Histoire  critique  de  V Impot  des  Boissoas,  etc.     Paris,  1849. 
A.  Heine.     Ube>'  die  Branntzveinsteuersysteme,  etc.     (In  the  Zeitschr.  f.  d. 

ges.  Staats7u.,  1872.) 
V.  Ellena.     /  tiibuti  sullo  Ziicchero  e  sugli   Spiriti.     (In  the  Are/iivio  di 

Statistica,  Anno  III.     Rome,  1878.) 
R.  V.  Kaufmann.      Die  Zuckeiindtistrie.      Berlin,  1S78. 
J.  Wolff.     Die  Zuckersteuer.      (In  the  Zeitschr.  f.  d.  ges.  Staatsiv.,  1882.) 
Villerme  fils.     Les  Douanes  et  la  Contrebaitde.     Paris,  1851. 

G.  Cappetlari  della  Colomba.     Le  imposte  di  confine,  etc.     Florence,  1866. 
Barillon.      Suppression  des  Octjvis.     Paris,  1841  ;  2d  ed.,  1862. 

C.  Pallavicino.  L'abolizione  delle  Dogane  degli  Octrois,  etc.  (In  the  Re- 
vista  Contemp.     Turin,  1S60.) 

M.  Chevalier.     L  Industrie  et  I  Octroi  de  Paris.      Paris,  1867. 

T.  Jandalli.      Sui  dazii  locali  di  consumo.      Florence,  1873. 

G.  Allessio.  D Imposta  del  Dazio  consumo  in  Italia,  etc.  (In  the  A nnali 
di  Statistica.)     Series  2.     Vol.  17.      Rome,  1S80. 

G.  Hansen.  Die  norniirung  der  Eingangszolle,  etc.  (In  the  Zeitschr.  f.  g. 
ges.  Staatszaiss,  1865.) 

C.  F.  V.  Hock.  Betrachtungen  iiber  die  Aufhebuttg  alter  Zolle,  etc.  (Ibi- 
dem, 1865.) 

F.  Ferrara.     Le  Dogane  moderne.     (In  the  Nuova  Antologia,  1S69.) 

Ad.  Wagner.  Article  :  Zolle  in  the  Deutsches  Staatsworterbuch,  by  Bluntschli 
and  Brater.     Vol.    XI.     (Stuttgart,  1S6S),  pp.  340-397. 

L.  V.  Bilinski.     Die  Luxussteuer,  etc.     Leipsic,  1S75. 


§  5.  Imposts  on  Income  and  Property  in  General. 

B.  Bayer.     On  the  Income  Tax.     London,  1S31. 

B.  Benvenuto.      Dell'  ifnposta  unica  sulla  rendita.      Turin,  1850. 

C.  W.  von  Graffenreid.     Die  Einkommensteiier.     Zurich,  1855. 

E.  Je  Parieu.     Histoire  des  I/npots  g^n&aux  sur  la  Propridtd  et  le  Revenu. 
Paris,  1856. 


190  BIBLIOGRAPHY  OF  FINANCE. 

E.   Broglio.     Deir  Iniposta  siilla  rendita  in  Inghilterra  e  stir  capitate  negli 
Stati  Uniti.      Turin,  1856.      2  vols. 

E.  Corbetta.      L'imposta  sulca  rendita  mobiliare.      Milan,  1865, 

N.  G.  Pierson.    De  Inkomstenbelasting.     (In  the  Review  Z>^  Cz'^/j,  1871.) 

Ad.  Held.     Die  Einkommensteuer.     Bonn,  1872. 

L.  Wolowski.     L'liiipdt  siir  le  RevcJtu.     Paris,  1872. 

S.  Glattstern.      Die  Stcuer  von  Einkommen.      Leipsic,  1876. 

G.  Ricca-Salerno.   DelP  iniposta  sul  Reddito.    (In  the  Annuario  delle  Scienze 

giuridiche  di  C.  F.  Ferrario.     Anno  II.      Milan,  1881,  pp.  370-412.) 
J.  F.  J.  Vuy.     Essai  sur  la  I'axe  dcs  Gardes.    Geneva,  1838. 
David  (du  Gers).     Nature,  etc.,  de   t Imp6t  sur  le  Capital.     (In  t\ie  Journal 

des  Economistes,   1850.) 
C.  G.  Kries.     Ueber  die  Vermogenssteuer  im  Staate  New  York.    (In  the  Zeit- 

schr.  f.  d.  ges.  Staatswiss.,  1855.) 
C.  Baer.     II  catasto  Jiorentino  del  secolo  XV.,  ovvero  I'itnposta  sul  capitale. 

(In  the  Antologia  Nuova,  1871.) 
Menier.      Tht'orie  de  TApplicatioti  de  I'Impot  sur  le  Capital.     Paris,  1874. 
M.  H.  Denis.     L'lmpot  sur  le  Revenu.     Brussels,  1881. 

F.  Chailley,     L'lmpot  sur  le  Revenu.     Paris,  1884. 


§  6.   Local   Taxation. 

E.  Serra-GropelH.     Le  Jinanze  dei    Communio  delle   Provincie.      Modena, 

1870. 
R.  H.  I.  Palgrave.     On  Local  Taxation.     London,  1871.     (In  ih.Q  Journal 

of  the  Statistical  Society.) 
G.  T-  Goschen.      Local  Taxation.     London,  1872. 
P.   LeroyBeaulieu.     U Administration  locale  en  France,  et  en  Angleterre, 

Paris,  1873. 
T.  W.  Probyn.     Local  Government  and  Taxation.     London,  1875. 
Die  Communalsteuerfrage,  Zehn  Gutackten  und  Berichte.     Leipsic,  1877. 
Rob.  Friedburg.     Die  Besteuerung  der  Gemeinden.     Berlin,  1877. 
V.  Ellena.     La   Finanze  Communali.     Rome,  1878.     (In  the   Archivio  di 

Statistica,  Anno  II.) 
Ad.  Wagner.      Die  Communalsteuerfrage,  etc.     Leipsic,    1878. 
A.  Salandra.      11  liordinamento  delle  Jinanze  comunah.     Rome,  1878.     (In 

the  Nuova  Antologia.) 
L.  von  B'.linski.       Die  Gemeiitdebesteuerung.  etc.      Leipsic,  1878. 
C.  Soro-Delitala.      //   Sistema    tributotio  dei    Comuni   e   delle    Provincie. 
Rome,  1879. 


BIBLIOGRAPHY  OF  FINANCE.  19I 

SECTION    V. 

Public  Debt. 

Chapter    I. 

Public  Debt  in  General. 
§  I.   English  and  F}-ench   Works. 

R.  Hamilton.     An  Inquiry  into  the  Rise  and  Progress,  etc.,  of  the  National 

Debt.     Edinburgh,  1S14  ;  3d  edition,  181S. 
L.  C.  A.  Dufresne  Saint  Leon.     £tude  du  CrJdit  public   et  des  Dettes pub- 

liques.     Paris,    182^. 
T.  B.  Yuvigny.     Principes  e'l^inentaires  des  Einprunts  publics,  etc.     Paris, 

1839. 
W.  Newmarch.     On  the  Loans  Raised  by  Mr.  Pitt.   London,  1855.     (In  the 
Journal  0/  the  Statistical  Society.     Vol.  XV.) 

E.  Capps.      The  N'ational  Debt  financially  considered.     London,  1879. 

CI.  Royer.     Des  Empruttts  et  des  Contributions  de  Salut  public.     (In   the 

Journal  des  Economistes,  1 866. ) 
D.Baxter.     National  Debts.     London,   1871. 
H.  C.  Adams.     Public  Debts.     New  York,  1887. 

§  2.    German    Works. 

F.  Nebinius.     Der  offentlihe  credit.     Carlsruhe,  1820  ;  2d  ed.,  1829. 
N.  Th.  V.  Conner.     Vo7t  Satatss'chttlden,  eic.     1st  vol.    Munich,  1826. 

E.   Baumstark.      Staatswissenschaftlicke    Versuche   ilber   Staatscredit,    etc. 

Heidelberg,  1833. 
C.  Deitzel.     Das  System  der  Staatsanleihen.      Heidelberg,  1855. 
Ad.  Wagner.    Article  :    Staatschulden.     (In  the  Deutches  Staats'vorterbuch, 

by  Bluntschli  and  Brater.  Vol.  X.  Stuttgart,  1867.) 
Ad.  Sotbeer.     Betruchtungen  ilber  das  Staatsschuldenwesan.     (In  the  Vier- 

teljahsschr.  fiir  Volkswerthsch).  etc.      Berlin,  1865.     Vol.  III. 
O.  Michaelis.      Ueber  auswdrtige  Anleihen.     (Ibid.,  1867.) 
E.  Nasse.     Steuern  iind  Staatsanleihen.      (In  the  Zeitschr.  f.  d.  ges.  Staats- 

wiss.     Tubingen,  1S68.) 
V.  Bohmert.      Lotterien  und  Prd/nieaanleihen.      Berlin,  1869. 

§  3.   Italian    Works. 

G.  De  Welz  (Franc.  Fuoco).    La  magia  del  Credito  svelata.    Naples,  1824.  2 

vols. 


192  BIBLIOGRAPHY  OF  FINANCE. 

L.  Bianchini.  Principii  del  Credito  pubblico.  Naples,  1827.  2d  edition, 
1831. 

B.  V.  Zambelli.     Del  Credito ptivato  e pubblico.     Padua,  1850  ;  2  vols. 

A.  Messedaglia.     Dei  prestiti  ptibblici  e  del  miglior  sistema  di  consolida- 

zione.      Milan,  1S50. 
G.  Ferroglio.     I  debiti  puhblici.     Turin,  1869. 

A.  Salandra.    I  debiti pubblici  neW  economia  nazionale.     Naples,  1877. 
G.  Ricca-Salerno.      Teoria  generale  dei  prestiti  pubblici.     Milan,  1879. 

§  4.    Works  in  other  Languages. 

H.  Hooft  Graftland.     Die  Staatsschulden,  etc.     Utrecht,  1851. 

N.  Bunge.     The  Theory  of  Credit  (in  Russian).  Kiew,  1852. 

T.  T.  Weevering.  Handleiding  tot  de  geschiedenis  der  Siaatschulden.  Am- 
sterdam, 1S52.      2  vols. 

L.  M.  Pastor.     La  Jilosofia  del  Credito.     2d  edition,  Madrid,  1858. 

A.  Hernandes  Amores.  Nociones  elementales  de  Credito  publico.  Murcia, 
1859. 

Chapter  II. 

special  Questions  Concerning  the  Public  Debt. 
§  I .  Floating  Debt  and  Paper  Money. 

Ad.  Wagner.    Die  Ordnung  des  Oesterreichischen  Staatshaushaltes.    Vienna, 

1863. 
Fr.  Ferrara.      II  corso  forzato  dei  bigUetti  di  banco  in  Italia.   (In  ihe  Nu ova 

Antologia,   1866-68.) 
Ad.  Wagner.      Die  russische  Papierwdhrung.      Riga,  1868. 
R.  Busacca.     Studii  sul  Corso  forzato,  etc.     Florence,  1870. 
Minghetti  e  Finali  (Romanelli).    Relazione  sulla  circolazione cartacea.   Rome, 

1875. 
Th.  Hertzka.      Wdhrung  und  Handel.     Vienna,  1876. 

C.  F.  Ferraris.     Moncta  e  corso  forzoso.      Milan,  1879. 

S.  Piperno.  Le  cagioni  dell'  aggio.  Rome,  1880.  (In  the  Archivio  di 
Statistica.    Anno  V.) 

§  2.    Conversion  of  the  Rente. 

I.  Lafitte.     Reflexions  sur  la  Reduction  de  la  Rente,  etc.     Paris,  1824. 
L.    Bianchini.     La  conversione   delle   renditi  del  debito  pubblico.     Naples, 
1S36. 


BIBLIOGRAPHY   OF  FINANCE.  1 93 

G.  Savarese.      Saggio  sulla  nduzionc  del  debito  puhblico.     Naples,  1836. 

F.  Nebenius.      Uber  die  Herabselzung  der  Zinsen  der  Offentlichen  Schulden. 

Stuttgart,  1S37. 
H.  Labeyrie.     Fh^orie  et  Histoire  des  Conversions  de  Rentes.     Paris,  1878. 

G.  Ricca-Salerno.     Di  akune  questioni  relative  al  debito  pnbblico,     (In  the 

Annuario    delle    Scienze    giuridiche   of    C.    F.    Ferraris.     Anno     III. 

Milan,  1882  ;  pp.  41-86.) 
Cucheval-CIarigny.     Essai  sur  l' Amortissement  et  sur  les  Emprunts  d'Etats. 

Paris,  1886. 
L.  Luzzatti.     Convertire  e  amiiiortizzare.     (In  the  Ntiovo  Antologia,  1885.) 
J.  Polo  de  Bernabe  y  Borras.     Arreglo  o  Bancarrota,  etc.     Madrid,  1874. 


MISCELLANEOUS. 


See  works  cited  by  J.   R.   McCulloch  in  Literature  of  Political  Economy. 

London,  1845,  Chapter  XIX.     Revenue  and  Faxation. 
Gustav  du  Puynode.     Les  grandes  Crises  Financihres  de  la  France.     Paris, 

1876. 
John  Sherman.     Selected  Speeches  and  Reports  on  Finance  and  Faxation, 

from  1859  to  1878.     New  York,  1S79. 
Charles  Tennant.      Faxation  as  it  is,  and  as  it  ought  to  be.     London,  1872. 
Stephen  Dowell.     History  of  Faxation   and  Faxes  in  England.     4  vols. 

London,  1884. 
A.  S.  Bolles.     Financial  History  of  the  United  States.     3  vols.     New  York, 

1879-1885. 
Edward  G.  Bourne.     History  of  the  Surplus  Revenue  of  1837.     New  York, 

1885. 


APPENDIX 


THE  EXISTING  SYSTEMS  FOR  THE  ASSESSMENT  AND 
COLLECTION  OF  STATE  TAXES  IN  NEW  YORK  AND 
PENNSYLVANIA,  AND  THE  RATES  OF  TAXATION 
THEREIN. 

Systems  and  rates  of  taxation  in  the  several  States  of  the  Union  are  so 
diverse  and  changes  are  made  so  frequently  by  statute  and  judicial  decisions, 
that  only  an  expert  can  tell  what  is  the  law  in  any  particular  State.  Mr. 
Julien  T.  Davies,  in  his  Compilation  of  Constitutional  Provisions,  Statutes 
and  Cases  Relating  to  the  Assessment  of  Taxes  in  the  State  of  New  York, 
has  occasion  to  make  no  less  than  six  hundred  and  twenty-three  references 
to  judicial  decisions  arising  under  the  tax  laws  of  this  State,  or  throwing 
light  upon  the  same.  The  Auditor-General  of  Pennsylvania,  in  his  annual 
report  for  iS86,  says :  "  It  is  in  many  cases  difficult  to  determine  what  the 
law  is  upon  a  given  subject.  For  fifty  years  acts  have  been  repealed  and 
others  have  been  amended  until  too  frequently  no  one  can  tell  what  act  is 
in  force  and  what  is  not.  Others  have  been  drawn  in  great  haste  and 
amended  when  almost  on  final  passage,  and  at  times  the  amendments  con- 
tradict the  terms  and  intent  of  the  original  bill."'  It  has  been  deemed  a 
useful  addition  to  this  treatise  to  present,  in  a  reasonably  compact  form,  the 
existing  laws  and  systems  of  the  two  largest  States  of  the  Union.  It  is  be- 
lieved that  as  great  accuracy  has  been  attained  as  is  possible  under  the  try- 
ing conditions  mentioned  in  the  foregoing  quotation,  which,  it  may  be 
added,  is  as  applicable  to  New  York  as  to  Pennsylvania. 

State  taxes,  measured  by  the  amount  of  the  collections,  are  relatively  un- 
important as  compared  with  city,  town  and  county  taxes,  but  since  all  have 
their  origin  in  the  State  law  it  is  here  that  we  must  seek  the  ideas  upon 
which  they  are  based. 

The  distinguishing  feature  of  the  Pennsylvania  system  is  that  the  State 
revenue  is  derived  wholly  from  personal  property  including  corporations, 


19^  APPENDIX. 

but  real  estate  pays  most  of  the  local  taxes.  In  that  State  the  Auditor- 
General  computes  that  the  total  tax  paid  by  personal  property  including 
corporations,  but  not  including  collateral  inheritances,  is  $5,962,344  and 
by  real  estate  $30,395,350.  I  have  made  a  calculation  that  in  New  York 
the  total  tax  paid  by  personal  property  including  corporations,  but  not 
including  inheritances,  is  $7,391,467  and  by  real  estate  $51,381,478.  In 
other  words,  personal  property,  including  corporations,  pays  16.6  per  cent, 
of  all  the  taxes  in  Pennsylvania,  and  12.6  per  cent,  in  New  York. 


NEW  YORK. 

There  are  three  different  systems  of  taxation  in  the  State  of  New  York  : 

First. — Real  and  personal  property  is  taxable  at  uniform  rates,  through 
the  medium  of  the  local  authorities,  for  local  and  State  purposes.  Valuations 
of  all  real  and  personal  jiroperty,  not  specially  exempted  by  law,  are  made 
by  local  assessors  and  returned  by  them  to  the  county  boards  of  supervisors. 
These  boards  may  add  to  or  subtract  from  the  total  valuations  of  the  real 
estate  in  any  town,  but  may  not  diminish  the  aggregate  valuation  of  the 
county.  The  county  boards  of  supervisors  transmit  to  the  State  Comptroller 
the  aggregate  assessments  of  real  and  personal  property  ;  the  State  board  of 
equalization,  from  the  figures  thus  transmitted  to  the  comptroller,  equalize 
the  assessments  in  the  various  counties  by  adding  to,  or  subtracting  from, 
the  total  valuations  of  the  real  estate  in  any  county,  but  they  cannot  diminish 
the  aggregate  valuation  in  the  State.  From  the  data  so  obtained  the  legis- 
lature fixes  annually  the  rate  of  tax  for  State  purposes  which  shall  be  col- 
lected from  real  and  personal  property.  The  State  Comptroller  determines 
the  quota  of  the  State  taxes  to  be  collected  by  the  several  counties  and  paid 
to  the  State  treasurer.  The  sum  so  fixed  must  be  paid  by  the  counties, 
whether  collected  from  the  property  or  not. 

Speaking  generally,  all  real  and  personal  property  is  subject  to  assess- 
ir.ent.  That  property  of  religious  bodies  and  of  incorporated  educational 
and  charitable  institutions  and  of  public  libraries,  which  is  used  exclusively 
for  their  own  purposes,  is  exempt  from  taxation  ;  also  cemeteries,  the 
personal  property  of  clergymen  (and  their  real  estate,  if  occupied  by  them), 
to  the  amount  of  $1,500  each. 

All  property  exempted  from  taxation  under  the  Constitution  of  the 
United  States  is  also  free  from  assessment  in  this  State.  This  provision 
excludes  federal  bonds,  imported  goods  in  their  original  packages,  and 
property  in  the  course   of   transmission  from  one  State  to  another,  and  the 


APPENDIX.  197 

gross  receipts  of  transportation  coinpanies  arising  from  inter-State  business. 
It  does  not,  however,  exclude  from  taxation  the  property,  as  fjvperty,  of  the 
transporter  which  is  engaged  in  the  inter-State  business.  Property  exempted 
by  law  from  execution  is  also  exempt  from  taxation.  Deposits  in  banks  for 
savings,  and  the  accumulations  of  the  life  insurance  companies,  held  for  the 
exclusive  benefit  of  the  insured,  are  not  liable  to  taxation  ;  though  the  real 
estate  and  other  taxable  property  of  the  corporation  are  liable.  The  owner 
of  stock  in  an  incorporated  company  in  this  State,  liable  to  taxation  on  its 
capital,  cannot  be  taxed  for  his  shares.  Vessels  registered  in  this  State, 
owned  by  American  citizens  or  associations  or  corporations  of  New  York, 
engaged  in  ocean  commerce  between  any  port  in  the  United  States  and  any 
foreign  port,  are  exempt  from  all  taxation  for  State  and  local  purposes,  and 
the  corporations  themselves  are  exempt  for  fifteen  years  (from  1881)  from 
all  taxation  for  State  or  local  purposes  upon  their  capital  stock,  franchises, 
or  earnings.  Lands  belonging  to  the  State,  or  to  the  United  States,  are 
exempt  from  taxation,  except  forest  lands  belonging  to  the  State  in  the 
"Forest  Preserve,"  which  may  be  taxed  for  local  purposes  the  same  as 
private  lands,  under  the  supervision  of  the  State  Comptroller  and  the  Forest 
Commission. 

Individuals  are  not  required  to  furnish  statements  of  their  personal  prop- 
erty, but  usually,  as  a  matter  of  courtesy,  are  notified  of  the  amount  fixed 
by  the  assessor,  and  are  given  an  opportunity  to  show  that  it  is  too  high.  A 
banker  is,  however,  required  to  make  a  return  to  the  assessor  of  the  amount 
of  the  capital  employed  in  his  business. 

The  debts  due  by  a  natural  person  may  be  deducted  from  the  assessed 
valuation  of  his  personal  property,  though  the  amount  of  a  mortgage  cannot 
be  deducted  from  the  valuation  of  the  real  estate  mortgaged.  Such  mort- 
gage debt  may,  however,  be  included  in  the  deductions  from  the  assessment 
of  personal  property.  Mortgages  held  by  private  individuals  are  taxable, 
as  are  also  generally  all  claims  due  from  solvent  debtors,  secured  or  un- 
secured. Mortgages  held  by  savings-banks  and  life-insurance  companies 
are  exempt  under  the  provision  already  mentioned. 

Personal  property  is  assessable  where  it  has  a  situs.  The  presumption 
of  law  is  that  such  situs  is  at  the  domicile  of  the  owner,  which  presumption 
may  be  rebutted.  If  tangible  personal  property  is  permanently  situated 
without  the  State,  it  is  not  taxable  here  to  a  private  individual. 

Bonds  of  foreign  railroad  companies,  and  other  debts  secured  on  prop- 
erty beyond  the  State,  arc  ordinarily  taxable  here.  And  generally  all  debts 
and  obligations  for  the  payment  of  money  due  or  owing  to  persons  residing 
within  this  State,  however  secured  or  wherever  such  securities  are  held,  are 
deemed,  for  the  purposes  of  taxation,    personal  estate  within  the  State,  and 


198  APPENDIX. 

are  assessable  as  such  to  the  owner  or  owners  thereof  in  the  town,  village, 
or  ward  in  which  such  owner  or  owners  reside  at  the  time  such  assessment 
is  made. 

Ships  have  their  situs  ordinarily  at  the  place  of  registration,  and  are  tax- 
able there. 

Corporations  are  assessed  under  this  system,  for  taxation  for  local  and 
.State  purposes,  as  follows:  Their  real  estate  is  taxable  like  that  of  a  natural 
person  ;  a  corporation  is  obliged  to  make  a  return,  under  oath,  to  the 
assessor,  showing,  among  other  things,  the  amount  of  its  capital  stock  and 
its  value,  including  its  surplus  profits  and  reserve  funds,  the  assessed  value 
of  its  real  estate  within  or  without  the  State,  and  all  shares  of  stock  in 
other  corporations  actually  owned  by  it,  which  are  taxable  on  their  capital 
stock  under  the  laws  of  this  State.  They  are  then  assessed  upon  the  actual 
value  of  the  whole  of  such  capital  stock,  including  such  surplus  profits  or 
reserve  funds  (exceeding  ten  per  cent,  of  the  capital),  after  deducting  the 
assessed  value  of  the  real  estate,  the  shares  of  stock  of  other  corporations, 
and  other  non-taxable  property,  chiefly  bonds  of  the  United  States. 
Whether  tangible  personal  property,  located  in  another  State,  shall  be  de- 
ducted from  the  total  value  of  the  capital  stock  is  still  an  open  question, 
though,  probably,  the  better  opinion  is  that  it  may  be  deducted.  This  as- 
sessment so  made  against  the  corporation  is  supposed  to  reach  all  of  its 
property  not  real,  and  therefore  it  is  not  taxable  specifically  upon  its  mort- 
gages or  other  personal  property.  All  corporations  doing  a  business  for 
profit  are  taxable  in  this  manner,  excepting  national  and  State  banks. 

Under  the  Federal  law,  national  banks  cannot  be  taxed  locally  upon 
their  capital  as  such,  but  the  shares  of  stock  may  be  taxable,  as  other 
moneyed  capital  in  this  State.  Such  shares  are  assessed  against  the  indi- 
vidual shareholder,  at  the  place  where  the  bank  is  situated,  for  their  full 
market  value,  less  a  proportionate  amount  for  the  assessed  value  of  the  real 
estate  of  the  bank.  No  deductions  are  allowed  for  holdings  of  government 
bonds  by  the  bank.  The  bank  is  made  liable  for  the  payment  out  of  divi- 
dends of  the  taxes  so  assessed  against  the  shareholder.  New  York  share- 
holders in  corporations  of  other  States  are  not  liable  to  taxation  on  such 
shares  in  this  State,  though  the  holders  of  bonds  or  other  obligations  of 
such  corporations  are  liable  to  taxation  if  such  holders  are  residents  of  this 
State. 

Foreign  fire-insurance  companies  doing  business  in  this  State  are  assess- 
able locally,  as  other  companies,  upon  their  capital  stock  employed  in  this 
State,  which  shall  be  taken  to  be  the  aggregate  value  of  the  securities  on 
deposit  in  the  insurance  department  of  this  State,  excluding  government  of 
other  non-taxable  securities. 


APPENDIX.  199 

The  Second  System  of  State  Taxation. — This  is  by  taxation  of  cor- 
porations upon  their  capital  stock,  and  is  chiefly  based  upon  the  statute  of 
1880  and  its  amendments.  That  imposes,  first,  a  tax  of  one-fourth  of  a 
mill  upon  tlie  capital  stock  for  each  one  per  cent,  of  dividends  ;  or,  if  the 
dividends  are  less  than  six  percent.,  then  at  tlie  rate  of  one  and  one-half 
mills  upon  each  dollar  of  valuation  of  the  capital  stock,  as  sworn  to  by  the 
company's  officers  in  a  return  to  the  State  Comptroller,  Formerly,  this  tax 
was  charged  upon  all  the  property  of  the  company,  whether  situated  within 
or  without  the  State,  but  is  now,  by  the  amendment  of  1885,  confined  to 
the  capital  employed  within  the  State.  Under  this  tax,  it  is  immaterial  in 
what  the  capital  is  invested  ;  therefore,  deductions  are  not  made  for  govern- 
ment or  other  non-taxable  securities. 

Savings-banks,  life,  fire  and  marine  insurance  companies,  domestic  or 
foreign,  banks,  manufacturing  or  mining  corporations  carrying  on  manufac- 
tures or  the  mining  of  ores  within  this  State  are  excepted  from  the  liability  to 
this  tax.  Gas  companies  and  trust  companies  are  not  embraced  within  the 
exception.  Corporations  of  New  York,  owning  vessels  engaged  in  foreign 
trade,  are  exempt  from  the  payment  of  this  tax  for  fifteen  years  from  1881. 

Fire  and  marine  insurance  companies  of  this  State  are  liable  to  pay  as  a 
tax  for  their  franchise  or  business  a  tax  at  the  rate  of  five-tenths  of  one  per 
cent,  per  annum  upon  the  gross  amount  of  premiums  received  from  busi- 
ness done  within  the  State. 

Transportation  companies  of  all  sorts  are  obliged  to  pay  as  a  tax  on 
franchise  five-tenths  of  one  per  cent,  upon  the  gross  earnings  in  this  State 
from  tolls,  transportation,  telegraph,  telephone,  or  express  business  trans- 
acted within  this  State. 

A  recent  decision  of  the  .Supreme  Court  of  the  United  States  excluded 
from  the  operation  of  this  tax  the  gross  earnings  of  such  companies  from 
inter- State  business. 

Banking  corporations  of  other  States  and  countries,  doing  business  in 
New  York,  are  required  to  pay  a  tax  of  one-half  of  one  per  cent,  each  year 
on  the  average  amount  of  their  deposits  and  of  moneys  received  and  used 
on  account  of  such  business  in  this  State. 

The  Third  System  of  State  Taxation. — This  embraces  revenue  de- 
rived by  the  State  for  special  privileges  granted  by  the  State  to  corporations 
and  others. 

Insurance  companies  of  other  States  are  liable  to  pay,  by  virtue  of  the 
reciprocal  tax  law — so  called — of  1875,  a  tax  upon  premiums  received  in 
this  State,  at  the  same  rate  as  that  which  is  imposed  by  the  States  from 
which  the  foreign  companies  come,  upon  New  York  companies  doing  busi- 
ness in  those  States.     (This,  at  least,  is  the  construction  of  the  statute  made 


200  APPENDIX. 

by  the  attorney-general,  and  it  has  thus  far  been  acquiesced  in  by  the  com- 
panies.) 

All  inheritances  exceeding  $500,  going  by  will  or  otherwise,  to  persons, 
more  distantly  related  to  the  decedent  than  parents,  husband,  wife,  chil- 
dren or  other  lineal  descendant,  brother,  sister,  son-in-law,  daughter-in-law, 
unless  to  societies  now  exempt  by  law  from  taxation,  are  required  to  pay  a 
tax  of  five  per  cent,  of  the  clear  market  value. 

For  privilege  of  organization,  all  corporations  having  capital  stock  di- 
vided into  shares,  not  including  literary,  scientific,  medical,  or  religious 
corporations,  are  required  to  pay  a  tax  of  one-eighth  of  one  per  cent,  upon 
the  amount  of  capital  stock  which  the  corporation,  by  its  charter,  is  author- 
ized to  have,  and  a  like  tax  upon  any  subsequent  increase. 

A  tax  of  five  per  cent,  upon  the  gross  receipts  for  admission  on  race 
days  to  race  tracks  owned  by  racing  associations  for  the  improvement  of 
the  breed  of  horses  shall  be  paid  annually. 


REVENUE    OF    THE    STATE    OF    NEW    YORK 
FOR    THE  YEAR   ENDED   SEPTEMBER    30,    1887. 


FROM    GENERAL   TAX    LEVY. 

For  general  purposes $3,656,472 

For  canals 2,148,928 

For  common  schools 3-708,384 

19.513,784 

FROM    OTHER    SOURCES. 

Tax  on  corporations $1,239,864 

New  franchises 201,663 

Collateral  inheritances 561.716 

Fees  of  public  officers 31.39° 

Insurance  department  fees 132,267 

Fees  of  notaries 29,997 

Income  from  permanent  funds 994. 650 

Miscellaneous 412,423 

*  State  prison  earnings  (gross) I.111.823 

$I4,2?9,577 

*  The  State  prison  expenses  for  the  same  period  are  reported  by  the 
comptroller  at  $1,628,523.45,  showing  a  deficiency  of  $516,699. 


APPENDIX.  20 1 

There  was  a  surplus  in  the  treasury  Sept.  30,  1S87,  of $3)  714,907 

State  debt  (net) 3,505,816 

Net  surphis $209,091 

City,  town  and  county  taxes  for  the  same  year  are  reported  at  $48,256,- 
144,  in  addition  to  the  State  taxes. 


NEW  YORK  CITY. 

Municipal  taxes  in  the  city  of  New  York  are  for  the  most  part  additional 
to  vhe  State  taxes  on  real  and  personal  property.  They  are  levied  by  the 
authority  of  the  Board  of  Aldermen,  but  the  aldermen  have  very  little  dis- 
cretion in  fixing  the  amount  to  be  raised  by  taxation.  The  comptroller  of 
the  city  prepares  annually  a  statement  of  ' '  the  amount  by  law  authorized 
to  be  raised  by  tax  in  that  year."  This  amount  comprises  all  the  appropria- 
tions decreed  by  the  Legislature  of  the  State,  and  the  estimates  of  expendi- 
ture made  by  the  Board  of  Estimate  and  Apportionment,  which  board  con- 
sists of  the  Mayor,  Comptroller,  President  of  the  Board  of  Aldermen  and 
President  of  the  Department  of  Taxes  and  Assessments.  All  these  officers 
are  elected  by  the  people  except  the  last,  who  is  appointed  by  the  mayor. 
The  estimate  thus  made  is  the  appropriation  bill  of  the  city,  for  although 
it  must  be  submitted  to  the  Board  of  Aldermen,  they  have  no  power  over 
it  or  any  part  of  it  except  to  refer  it  back  to  the  Board  of  Estimate  and 
Apportionment  for  one  reconsideration. 

The  assessment  of  real  and  personal  property  is  made  by  deputy  tax 
commissioners  appointed  by  the  Board  of  Commissioners  of  Taxes  and 
Assessments.  Appeals  from  assessments  are  allowed  to  the  Board  of  Com- 
missioners, and  afterward  to  the  Supreme  Court,  or  any  judge  thereof. 
When  the  assessment  rolls  are  completed,  they  are  delivered  to  the  Re- 
ceiver of  Taxes  with  the  warrant  of  the  Board  of  Aldermen  requiring  him 
to  collect  from  the  persons  named  in  the  rolls  the  sums  set  opposite  their 
names,  and  pay  the  same  to  the  chamberlain  of  the  city. 

In  addition  to  the  general  tax  levy  the  city  derives  revenue  from  licenses, 
market  rents,  ferry  and  dock  rents,  street  railroad  and  elevated  railroad 
franchises,  Brooklyn  Bridge  tolls,  Croton  water  rents,  street  vault  rents, 
fines  and  penalties,  county  clerk's  fees,  and  a  large  number  of  other  mis- 
cellaneous sources,  amounting  in  the  year  18S6  to  about  $9,000,000,  exclu- 
sive of  "special  and  trust  accounts"  ($2,128,036).  In  the  same  year  the 
general  tax  levy,  including  arrears  of  former  years,  yielded  $31,568,096. 
This  includes  the  city's  proportion  of  the  State  tax,  viz.  :  $4,199,606. 
9* 


202  APPENDIX. 


PENNSYLVANIA. 


The  assessment  and  collection  of  State  tax  on  personal  property  is  under 
the  supervision  of  three  commissioners  in  each  county,  who  are  elected  tri- 
ennially.  In  the  City  of  Philadelphia,  a  Board  of  Revision  performs  the 
duties  assigned  to  the  county  commissioners  in  other  parts  of  the  State. 

One  assessor  is  elected  in  each  township,  ward,  or  borough,  except  in 
the  city  of  Philadelphia,  where  two  are  appointed  for  each  ward  by  the 
Board  of  Revision  of  Taxes,  who  make  out  annually  complete  lists  of  all 
taxable  persons,  and  a  valuation  of  all  property  taxable  by  law  within  their 
respective  jurisdictions. 

Blanks  are  furnished  by  the  auditor-general  to  the  commissioners  of  the 
respective  counties  of  the  Commonwealth,  except  in  Philadelphia,  where 
they  are  furnished  to  the  Board  of  Revision  of  Taxes,  and  by  such  commis- 
sioners and  Board  of  Revision  of  Taxes  furnished  to  the  assessors,  to  be 
distributed  to  all  taxable  persons.  These  must  be  filled  up  by  the  tax- 
payers and  returned  under  oath  to  the  assessor. 

Except  where  otherwise  provided  by  special  Act  of  Assembly,  a  tax  col- 
lector is  elected  annually  by  each  borough,  ward,  or  township.  In  the  city 
of  Philadelphia  taxes  are  paid  to  a  receiver  of  taxes. 

(By  the  Revenue  Act  of  1S85  it  is  made  the  duty  of  the  prothonotaries 
of  the  Courts  of  Common  Pleas  for  the  different  counties  to  keep  a 
daily  record  of  the  judgments  filed  in  their  court,  with  the  names  of  the 
parties  in  whose  favor  they  are  made,  and  to  furnish  a  list  of  such  judg- 
ments and  parties  to  the  commissioners  of  the  respective  counties,  who  in 
turn  are  required  to  furnish  a  copy  of  such  list  to  the  different  assessors  ; 
and  it  is  the  duty  of  the  latter  to  compare  such  list  with  the  returns  made 
by  the  various  individual  tax-payers.  "  The  registers  and  recorders  of  the 
several  counties  are  also  required  to  keep  a  daily  record  of  the  mortgages  and 
deeds  filed  in  their  offices,  with  the  names  of  the  parties  in  whose  favor  they 
are  made,  and  to  furnish  a  list  of  the  same  to  the  proper  county  commis- 
sioners for  a  similar  comparison  with  the  individual  tax  returns.  In  case 
the  judgment,  deed,  or  mortgage  is  in  favor  of  a  non-resident  of  the  county, 
the  prothonotary  or  recorder  sends  a  statement  of  the  same  to  the  commis- 
sioners at  the  domicile  of  the  beneficiary,  for  a  comparison  with  his  return 
there.) 

Revenue  for  State  purposes  is  obtained  from  taxes  on  personal  property, 
including  that  of  corporations  ;  from  licenses  ;  from  bonus  on  charters  (de- 
fined by  the  courts  to  be  the  price  of  their  chartered  privilege) ;  gross  re- 
ceipts of  incorporated  companies  ;  gross  premiums  of  incorporated  insur- 
ance companies  of  the  State  ;  from  purchase  money,  and  interest,  of  State 


APPENDIX.  203 

lands  ;  from  net  income  of  private  bankers  and  brokers,  and  unincor- 
porated banks  and  savings  institutions  ;  from  logs  rafted  by  boom  compa- 
nies ;  from  legal  instruments  ;  from  loans  of  counties  and  of  municipal  and 
private  corporations  ;  from  the  commissions  of  notaries  public  ;  from  collat- 
eral inheritance  tax  ;  from  the  gross  receipts  of  incorporated  telegraph  and 
transportation  companies  ;  from  the  tax  on  the  sale  of  fertilizers  ;  and  from 
the  right  of  way  through  the  State  of  the  New  York,  Lake  Erie  and  Western 
Railroad  Company. 

Real  estate  is  not  subject  to  taxation  for  State  purposes,  but  pays  the 
larger  share  of  local  taxation. 

The  auditor-general,  State  treasurer  and  secretary  of  the  Common- 
wealth formerly  acted  as  a  State  Board  of  Equalization  of  Taxes  on  per- 
sonal property  when  ad  valorem  taxes  were  in  force  ;  but  since  ad  valorem 
taxes  have  been  abolished  they  are  vested  as  a  Board  of  Revenue  Commis- 
sioners, with  simply  the  power  of  adjusting  the  taxes  due  from  each  county, 
and  assigning  to  the  counties  their  proper  proportion  of  taxes  to  be  raised. 
Any  county  not  satisfied  with  their  adjustment  may  appeal  to  the  said  Board 
for  a  rehearing,  and  if  the  same  is  denied  them,  or  if  they  are  dissatisfied 
with  the  action  of  the  Board  on  such  rehearing,  they  may  appeal  to  the  Court 
of  Common  Pleas  of  Dauphin  County,  whose  decision  is  final. 

The  auditor-general,  State  treasurer  and  attorney-general  are  authorized 
to  revise  any  settlement  made  with  any  person  or  body  politic  by  the 
auditor-general  when  it  may  appear,  from  the  accounts  in  his  office,  or 
from  other  information  in  his  possession,  that  the  same  has  been  erroneously 
or  illegally  made,  and  to  resettle  the  same  according  to  law,  and  to  credit 
or  charge,  as  the  case  may  be,  the  amount  resulting  from  such  resettlement, 
upon  the  accounts  of  such  person  or  body  politic.  Act  April,  1869  (P.  L. 
ig).  While  sitting  in  this  capacity  they  are  known  as  the  Board  of  Public 
Accounts,  which  title  is,  however,  not  known  to  the  law. 

By  the  Act  of  May  14,  1874,  churches,  burial  grounds  not  held  for 
profit,  hospitals,  universities,  colleges,  seminaries,  academies,  associations 
and  institutions  of  learning,  benevolence  or  charity,  school-houses,  etc., 
were  exempted  from  all  local  taxation  upon  all  real  and  personal  property 
actually  in  use  and  occupation  by  them,  and  from  which  no  income  was 
derived.  The  application  of  this  act  is  narrowed  by  article  9,  section  I,  of 
the  Constitution  of  1.S74,  which  permits  of  exempiiou  from  taxation  of 
"public  property  held  for  public  uses,  actual  places  of  religious  worship, 
places  of  burial  not  used  or  held  for  private  or  corporate  profit,  and  insti- 
tutions of  a  purely  public  charity."  Under  this  section  schools  and  colleges, 
managed  by  private  corporations,  have  been  held  taxable,  as  not  being 
"institutions  of  purely  public  chaiity." 


204  APPENDIX. 

Personal  property  is  subject  to  taxation  at  the  rate  of  three  mills  on  the 
dollar. 

The  personal  property  subject  to  the  three-mill  tax  for  State  purposes  is 
as  follows:  All  mortgages  ;  money  owing  by  solvent  debtors,  whether  by 
promissory  note,  penal  or  single  bill,  bond  or  judgment  ;  also  all  articles  of 
agreement  ;  accounts  bearing  interest  owned  or  possessed  by  any  person  or 
persons  whatsoever  except  obligations  given  l^auks  for  money  loaned,  and 
bank-notes  ;  all  public  loans  or  stocks  whatsoever,  except  those  issued  by 
this  Commonwealth  or  the  United  States;  all  money  loaned  or  invested  in 
any  other  State,  and  all  moneyed  capital  in  the  hands  of  individual  citizens 
of  the  State  ;  all  stages,  omnibuses,  cabs,  hacks  and  other  vehicles  used  for 
transporting  passengers  for  hire,  owned,  used,  or  possessed  within  the  Com- 
monwealth by  any  person,  or  persons,  or  by  any  corporate  bodies  or  body ; 
all  annuities  over  two  hundred  dollars,  except  those  granted  by  the  Com- 
monwealth or  the  United  States  ;  all  personal  property  held,  owned,  used, 
or  invested  by  any  person,  company,  or  corporation,  except  always  such 
property  as  is  held  in  trust  for  religious  purposes  ;  all  shares  of  stock  or 
weekly  deposits  in  any  unincorporated  savings  fund  institution.  (Tax  on 
household  furniture,  pleasure  carriages  and  watches  was  repealed  by  Act  of 
May  13,  1887,  Pamphlet  Laws,  1887,  page  114)  The  tax  on  personal 
property  is  assessed  and  collected  by  the  county  officers  as  above  described. 
There  is  allowed  on  the  collection  of  this  tax  an  abatement  of  five  per 
centum  for  prompt  payment  of  the  tax,  and  a  commission  to  the  tax  collec- 
tors of  two  and  five  percent.,  depending  upon  the  time  in  which  the  tax  is 
paid.  In  some  counties  where  special  laws  are  still  in  existence  a  commis- 
sion of  five  per  cent,  is  allowed  the  county  for  collecting  the  tax.  A  com- 
mission of  one  per  cent,  is  allowed  the  county  treasurer  on  the  amount  of 
money  actually  paid  over  by  him  to  the  State  treasurer  on  account  of  State 
tax  on  personal  property.  The  county  treasurer  receives  as  a  compensation 
for  the  collection  of  the  tax  on  county  loans  and  for  the  collection  of  licenses 
five  per  cent,  when  the  amount  collected  for  State  purposes  does  not  exceed 
one  thousand  dollars,  one  per  cent,  when  it  exceeds  one  thousand  and  does 
not  exceed  two  thousand  dollars,  and  one-half  of  one  per  cent,  when  it  ex- 
ceeds two  thousand  dollars.     The  calculation  is  made  on  the  gross  amount. 

Under  the  Act  of  1S85  moneyed  capital,  including  mortgages,  is  exempt 
from  all  local  taxes. 

Collateral  inheritances  are  taxed  as  follows  :  "All  estates,  real,  personal, 
or  mixed,  of  every  kind  whatsoever,  situated  within  the  State,  whether  the 
person  or  persons  dying  seized  thereof  be  domiciled  within  or  out  of  the 
State,  and  all  such  estates  situated  within  another  State,  Territory,  or  coun- 
try, when  the  person  or  persons  dying  seized  thereof  shall  have  their  domi- 


APPENDIX.  205 

cile  within  the  Commonwealth,  passing  from  any  person  or  persons  who  may 
die  seized  of  such  estate  either  by  will  or  under  the  intestate  laws  of  the 
Commonwealth,  or  any  part  of  such  estate  or  interest  therein  transferred  by 
deed,  bargain,  or  sale  made  or  intended  to  take  effect  in  possession  after  the 
death  of  the  grantor  or  bargainor,  to  any  person  or  persons,  or  to  bodies 
corporate  or  politic,  in  trust  or  otherwise,  other  than  to  or  for  the  use  of 
father,  mother,  husband,  or  wife,  children  and  lineal  descendants  born  in 
lawful  wedlock,  or  the  wife  or  the  widow  of  the  person  dying  seized  or  pos- 
sessed thereof,  shall  be  and  they  are  hereby  made  subject  to  a  tax  of  five 
dollars  on  every  hundred  dollars  of  the  clear  value  of  such  estate  or  estates, 
to  be  paid  to  the  use  of  the  Commonwealth."  (Pamphlet  Laws,  1887,  page 
79.)     The  collection  is  made  by  the  Register  of  Wills. 

Taxes  on  corporations  are  payable  by  the  officers  of  the  same  directly  to 
the  State  treasurer.  No  corporation  may  go  into  operation  in  the  State 
without  first  having  its  name,  the  date  of  its  incorporation,  the  Act  of  As- 
sembly, or  other  authority  under  which  it  was  incorporated,  the  place  of 
business,  the  post-office  address,  the  names  of  the  president,  secretary  and 
treasurer,  and  the  amount  of  authorized  capital  and  the  amount  of  capital 
stock  paid  in,  registered  in  the  auditor-general's  office,  under  penalty  of  a 
fine  of  $500.  The  president  and  treasurer  of  every  incorporated  company 
doing  business  in  the  State  (except  banks,  savings  institutions  and  foreign 
insurance  companies)  must  make  an  annual  report,  stating  the  total  author- 
ized capital  stock  of  the  company,  the  number  of  shares  of  stock,  the  par 
value  of  each  share,  the  amount  of  each  share  paid  in,  the  amount  of  capital 
paid  in,  and  the  date,  amount,  and  rate  per  cent,  of  each  and  all  dividends 
paid  within  the  year,  ending  with  the  first  Monday  in  November.  When 
a  company  fails  to  declare  a  dividend  during  the  year  ending  as  above,  or 
when  its  dividends  are  less  than  six  per  cent,  a  year  on  the  par  value  of  the 
stock,  the  treasurer  and  secretary  of  the  company  must  appraise  the  capital 
stock  at  its  actual  cash  value,  and  submit  their  appraisement  to  the  auditor- 
general,  with  a  copy  of  their  oath  or  affirmation  to  the  truth  of  the  same. 
The  auditor-general  and  State  treasurer  may  also  make  a  valuation  if  they 
are  dissatisfied  with  the  one  returned  by  the  company.  If  tlie  company, 
in  turn,  is  dissatisfied  with  this  settlement,  it  may  appeal  to  the  Court  of 
Common  Pleas,  as  in  any  other  case  of  appeal  from  the  settlement  of  ac- 
counts by  the  auditor-general  and  State  treasurer. 

In  case  any  company  does  not  make  the  above  return  by  the  31st  of 
December  in  each  year,  ten  per  cent,  is  added  to  the  tax  due  the  Com- 
monwealth. If  the  officers  of  any  company  intentionally  fail  for  three  suc- 
cessive years  to  make  the  above  return,  the  charter  of  the  company  is  for- 
feited on  the  governor's  proclamation,  although  the  constitutionality  of  this 


206  APPENDIX. 

law  is  very  generally  doubted,  it  never  having  been  judicially  passed  upon. 
AH  due  and  unpaid  taxes  bear  interest  at  the  rate  of  twelve  per  centum  from 
sixty  days  after  the  approval  by  the  State  treasurer  of  the  settlement  of  such 
taxes,  in  addition  to  such  penalties  as  are  prescribed  by  law. 

AH  taxes  are  liens  upon  the  property  and  franchises  of  corporations,  ex- 
cept the  bonus  on  charters,  one-half  of  which  is  required  to  be  paid  before 
articles  of  incorporation  are  issued. 

If  ihe  dividends  made  by  any  company  within  the  year  ending  the  first 
Monday  in  November  exceed  six  per  cent,  on  the  par  value  of  the  stock, 
the  tax  is  one-half  of  a  mill  on  the  capital  stock  for  each  one  per  cent,  of 
dividend  declared.  If  no  dividend  is  declared,  or  if  the  dividend  does  not 
amount  to  six  per  cent,  upon  the  par  value  of  the  stock,  the  tax  is  three 
mills  upon  each  dollar  of  the  valuation  of  the  capital  stock  made  as  above. 
That  is,  if  a  company  has  a  capital  stock  of  $1,000,000,  it  pays  an  annual 
tax  of  $3,000  under  this  law  until  its  dividends  are  more  than  six  per  cent., 
and  then  an  additional  $500  for  every  one  per  cent,  of  dividend.  If  a  com- 
pany has  jnore  than  one  kind  of  stock,  such  as  common  and  preferred,  and 
on  one  of  these  a  six  per  cent.,  or  larger  dividend  is  paid,  the  tax  on  that 
part  of  the  stock  which  pays  six  per  cent,  or  more  is  taxed  at  the  rate  of 
half  a  mill  on  the  dollar,  for  each  one  per  centum  of  the  amount  of  dividend 
paid,  and  that  part  of  the  stock  which  pays  no  dividend,  or  less  than  six  per 
cent.,  is  taxed  three  mills  on  the  dollar.  When  any  profit  is  added  to  the 
reserve  fund  it  is  treated  as  having  been  divided  amongst  the  stockholders, 
and  it  subjects  the  capital  stock  to  taxation  as  if  it  were  a  dividend,  unless 
such  profit  is  expressly  set  aside  for  the  payment  of  debts. 

Transportation  companies  organized  as  limited  partnerships,  and  all 
other  limited  partnerships  and  joint-stock  companies,  unless  organized  for 
manufacturing  or  mercantile  purposes,  are  subject  to  a  half  mill  on  each  one 
per  cent,  of  dividend,  and  three-mill  tax  as  above  described.  For  purposes  of 
taxation  interests  in  limited  partnerships  are  deemed  to  be  capital  stock, 
and  any  division  of  profits  to  the  owners  of  such  interests  are  taxed  as 
dividends. 

[The  practice  in  the  beginning  was  (1)  to  tax  railroad  companies  incor- 
porated in  Pennsylvania  on  that  proportion  of  their  capital  slock  which 
their  mileage  in  the  State  bears  to  their  total  mileage,  (2)  to  tax  other  com- 
panies incorporated  in  the  State  on  their  entire  capital  stock  wheresoever 
invested  or  employed,  and  (3)  to  tax  corporations  of  other  States  doing 
business  in  Pennsylvania  only  on  the  proportion  of  their  capital  stock 
invested  in  the  State.  As  the  statute  does  not  in  terms  authorize  such 
distinctions,  and  as  the  Supreme  Court  of  the  State,  in  the  case  of  Fox's 
Appeal,  refused  to  consider  this  a  franchise  tax,  but  held  that  it  was    "  a 


APPENDIX.  207 

rax  on  property  and  assets,"  the  practice  now  is  to  tax  domestic  corpora- 
tions only  on  the  capital  stock  cmiiloyed  in  the  State.] 

Railway  and  other  transportation  companies,  telegraph,  express,  palace- 
car  and  sleeping-car  companies  are  taxed  eight-tenths  of  one  per  cent,  on 
their  gross  receipts.  Such  companies  owning  or  operating  coal  mines  are 
required  to  include  the  transportation  of  the  coal  in  their  gross  receipts,  but 
not  the  coal  itself. 

(The  tax  on  gross  receipts,  in  so  far  as  it  touches  inter-State  or  foreign 
commerce,  has  been  pronounced  unconstitutional  by  the  Supreme  Court  of 
the  United  States,  as  already  mentioned  in  this  volume.  The  question 
pending  in  this  State  now  is  whether,  under  the  decision  of  the  Supreme 
Court,  the  gross  receipts  of  a  railroad  lying  entirely  within  the  State,  upon 
business  coming  to  it  through  another  road  into  or  out  of  the  State,  are 
properly  taxable.  In  other  words,  whether  the  ultimate  destination  of 
freight  through  other  hands  makes  it  inter-State  trat^c  in  their  hands, 
though  their  own  services  are  performed  entirely  within  the  Commonwealth. 
A  large  amount  of  taxes  is  withheld  by  companies  pending  a  decision  of 
this  point.) 

The  shares  of  banks,  savings  institutions,  trust  companies,  safe-deposit 
companies,  title-guarantee  companies  and  similar  institutions  are  taxable 
for  State  purposes,  at  the  rate  of  three  mills  on  the  dollar.  But  such  com- 
panies may  elect  to  pay  directly  to  the  State  treasury  a  tax  of  six-tenths  of 
one  per  cent,  on  the  par  value  of  their  shares,  in  which  case  they  are  exempt 
from  local  taxation,  except  on  their  real  estate  ;  and  banks  universally  elect 
to  pay  such  six-mill  tax. 

The  loans  and  bonded  indebtedness  of  counties,  boroughs,  cities,  towns 
and  incorporated  companies,  represented  by  bonds,  certificates,  or  other  in- 
terest-bearing obligations  held  by  citizens  of  the  State,  are  taxable  at  the  rate 
of  three  mills  on  the  dollar  of  their  nominal  value.  The  treasurers  of  such 
counties,  boroughs,  cities,  towns  and  incorporated  companies  are  required 
to  report  annually  for  the  year  ending  the  first  Monday  of  November  of 
each  year  the  nominal  value  of  all  their  scrip,  bonds  and  evidences  of  in- 
debtedness, to  the  auditor-general,  and  to  deduct  the  tax  upon  the  same 
from  the  interest  payments  falling  due  to  such  holders  of  their  scrip,  bonds, 
and  evidences  of  indebtedness.  (The  payment  of  this  tax  is  now  being  re- 
sisted in  the  courts  on  the  ground  that,  being  upon  the  nominal  value  of  the 
loans  or  bonded  indebtedness,  it  is  unconstitutional  in  not  being  uniform, 
and  that  the  State  cannot  constitutionally  impose  the  duty  of  collecting  the 
tax  upon  the  treasurers  of  such  companies.) 

Newly  incorporated  companies  must  pay  a  bonus  for  their  charter  privi- 
lege of  one-quarter  of  one  per  centum  on  their  authorized  capital,  or  any  sub 


208  APPENDIX. 

sequent  increase  thereof,  payable  one-half  on  the  date  of  their  incorpora- 
tion, and  the  other  half  one  year  from  such  date.  (The  auditor-general's 
department  holds  that  the  words  "subsequent  increase  thereof"  means 
the  amount  subsequently  authorized,  and  not  the  amount  of  actual  in- 
crease.) 

Insurance  companies  organized  under  the  laws  of  Pennsylvania  pay 
eight-tenths  of  one  per  cent,  on  their  gross  premiums  received  from  busi- 
ness done  in  Pennsylvania.  Foreign  insurance  companies  pay  $25  per  an- 
num, and  in  addition  thereto  three  per  cent,  on  their  premiums  received 
from  business  transacted  in  the  State. 

Private  bankers  and  brokers,  and  unincorporated  banks  and  savings  insti- 
tutions, pay  three  per  cent,  on  their  net  earnings,  such  earnings  to  be  re- 
turned by  themselves  under  oath. 

Clerks  of  courts,  registers  of  wills  and  recorders  of  deeds,  whose  net  re- 
ceipts exceed  $2,CXX)  per  annum,  are  required  to  pay  to  the  State  treasury 
fifty  per  centum  of  such  excess.  In  addition  thereto,  a  State  tax  of  $3.50  is 
imposed  on  every  writ  of  error  issued,  or  appeal  granted,  by  the  Supreme 
Court  of  the  State,  and  a  tax  of  fifty  cents  on  every  writ  issued  by  the  in- 
ferior courts,  and  of  twenty-five  cents  on  every  transcript  of  a  judgment  of 
a  justice  of  the  peace  or  alderman.  Recorders  of  deeds  are  required  to 
collect  for  the  State  fifty  cents  on  every  instrument  offered  for  record.  Reg- 
sters  of  wills  collect  for  the  State  fifty  cents  for  the  probate  of  each  will, 
and  the  same  amount  for  the  granting  of  letters  of  administration.  A  State 
tax  of  $10  is  levied  on  the  commissions  of  inferior  officers  of  cities  and  coun- 
ties, such  as  inspectors  of  food,  health  officers,  clerks  of  courts,  sheriffs,  etc. 

The  following  license  taxes  are  imposed  for  the  benefit  of  the  State  : 

Auctioneers,  from  $200  to  $3,000,  according  to  the  amount  of  their  sales. 

Billiard  tables  and  bowling  alleys  are  rated  as  follows  :  $30  for  the  first 
table  or  alley,  and  $10  for  each  additional  alley  or  table. 

Wholesale  dealers  in  intoxicating  liquors,  brewers,  distillers,  rectifiers, 
compounders,  storekeepers  and  agents  having  stores  or  offices  within  this 
Commonwealth,  dealing  in  intoxicating  liquors,  either  spirituous,  vinous  or 
malt,  shall  pay  for  each  separate  store,  brewery,  distillery,  rectifying  or 
compounding  establishment  or  agency,  an  annual  license,  in  cities  of  the 
first,  second  and  third  class  [ist  class,  600,000  inhabitants  or  over;  2d 
class,  150,000  and  less  than  600,000  ;  3d  class,  75,000  and  under  150,000  ; 
4th  class,  45,000  and  under  75,000  ;  5th  class,  20,000  and  under  45,000  ; 
6th  class,  10,000  and  under  20,000  ;  7th  class,  less  than  io,oooJ,  the  sum  of 
$500,  in  all  other  cities  $300  ;  in  boroughs,  the  sum  of  $200  and  in  townships 
the  sum  of  $100.     Act  of  May  24,  1887.     (Pamphlet  Laws,  1887,  page  194. 

Licenses  for  the   sale   of  vinous,  spirituous,  malt  or  brewed  liquors  at 


APPENDIX.  209 

retail  in  quantities  not  exceeding  one  quart  are  rated  as  follows  :  $500 
in  cities  of  the  first  class  ;  $300  in  other  cities  ;  $150  in  boroughs,  and 
$75  in  townships.  In  cities  of  the  first  class  four-fifths  shall  be  paid  for 
the  use  of  the  city  and  county,  and  one-fifth  for  the  use  of  the  Common- 
wealth ;  in  cities  of  the  second  and  third  class  two-fifths  shall  be  paid  for 
the  use  of  the  city,  two-fifths  for  the  use  of  the  proper  county,  and  one-fifth 
for  the  use  of  the  Commonwealth  ;  in  all  other  cities  or  boroughs  three- 
fifths  shall  be  paid  for  the  use  of  such  city  or  borough,  one-fifth  for  the  use 
of  the  proper  county,  and  one-fifth  for  the  use  of  the  Commonwealth  ;  in 
townships  one-half  shall  be  paid  to  the  township,  one-fourth  for  the  use  of 
the  proper  county,  and  one-fourth  for  the  use  of  the  Commonwealth.  Act 
of  May  13,  1S87.  (Pamphlet  Law,  1887,  page  iii.)  It  has  not  yet  been 
determined  how  these  proportions  are  to  be  distributed  ;  whether  the  whole 
tax  should  be  returned  to  the  State  treasurer,  and  by  him  distributed,  or 
whether  the  city  and  county  treasurers  should  make  the  distribution,  the 
law  being  silent  on  this  point. 

All  stock  brokers,  exchange  brokers,  merchandise  brokers,  and  bill 
brokers  are  required  to  pay  for  the  use  of  the  Commonwealth  a  license 
equal  to  three  per  centum  upon  the  estimated  amount  of  their  annual 
receipts,  as  fixed  by  the  mercantile  appraiser  of  their  county. 

^'eddlers,  on  foot,  $8  ;  with  one  horse  and  wagon,  $40  ;  with  two  horses 
and  wagon,  $50. 

Theatres,  circuses  and  menageries,  in  Philadelphia,  $500  for  one  year  ; 
in  Alleghany  County,  $200  ;  in  every  other  county,  .^50. 

Notaries  public  appointed  by  the  governor  are  required  to  pay  for  their 
commissions  $25  before  the  same  are  issued. 

All  persons  engaged  in  the  sale  of  goods,  wares  and  merchandise,  and 
who  have  a  store,  warehouse  or  other  place  for  the  purpose  of  making  such 
sales,  are  rated  by  the  mercantile  appraiser  of  the  proper  county  and  required 
to  pay  a  license  to  the  Commonwealth  ranging  from  $7  to  $1,000,  in  pro- 
portion to  the  sales  made  by  them. 

In  addition  to  the  foregoing  revenues  public  officers  of  the  State  are  re- 
quired to  collect  for  the  use  of  the  State  fees,  as  per  the  fee  bills  established 
by  law,  and  pay  the  same  into  the  State  treasury  every  three  months. 

Incorporated  boom  companies  are  required  to  make  return  to  the 
auditor-general  on  or  before  the  31st  December  of  each  year,  on  oath,  the 
number  of  logs  annually  rafted  by  them,  and  to  pay  to  the  Commonwealth  a 
tax  of  $100  on  each  100,000  of  logs  rafted  by  them,  as  aforesaid.    Act  of  1870. 

The  revenue  derived  from  lands  is  the  purchase  money  and  interest 
thereon  due  the  Commonwealth  on  all  vacant  and  unpatented  lands. 

The  New  York,  Lake  Erie  &  Western  Railway  Company  are  required  to 


2IO  APPENDIX. 

pay  annually  to  the  Commonwealth  the  sum  of  $10,000  for  the  privilege  of 
constructing  a  portion  of  their  road  through  the  counties  of  Susquehanna 
and  Pike  in  this  State. 

Manufacturing  companies,  except  those  engaged  in  making  malt, 
spirituous  or  vinous  liquors,  or  gas,  are  exempt  from  taxation  on  their  capital 
stock.  Revenue  Act  of  1885,  section  20.  (P.  L.  1885,  p.  199.)  They  are, 
however,  taxable  upon  their  loans  and  bonded  indebtedness  as  other  cor- 
porations, the  corporation  being  in  such  case  merely  the  collector  of  the 
tax,  which  tax  cannot  therefore  be  said  to  be  "laid  upon  manufacturing 
corporations"  within  the  meaning  of  the  Act  of  1885,  but  is  rather  laid 
upon  the  holders  of  the  bonds  or  loans  through  the  corporation.  To  come 
within  the  exemption  of  the  act  corporations  must  be  purely  manufacturing 
companies,  and  if  any  portion  of  the  capital  stock  of  a  company  is  invested 
in  the  purchase  of  goods  and  wares  manufactured  by  others,  and  sold  by 
such  corporation,  such  portion  of  capital  so  invested  is  taxable. 


REVENUE    OF    THE    STATE  OF    PENNSYLVANIA 
FOR   THE   YEAR   ENDED   NOVEMBER   30,  1887. 


From  State  lands $3,526.21 

Corporation  stock 1,702,057.04 

Gross  receipts  (corporations) 776,388. 12 

Gross  receipts  (notarie  spublic) 3,015.96 

Gross  premiums 42,619.39 

Logs 989.55 

Banks,  safe  deposits,  etc 431,628.14 

Net   earnings 81,596.92 

Loans 161,054.75 

Personal  property 864,355.36 

Writs,  wills,  deeds,  etc 117,495.89 

Collateral  inheritances 763,871.47 

Fertilizers 8,080.00 

Foreign  insurance  companies 377.571-63 

Tavern  licenses 565,163  67 

Carried  forward $5,899,414. 10 


APPENDIX.  211 

Brought  forward $5,899,414  10 

Eating-house  licenses 90,989.10 

Wholesale  liquor  licenses 39,821.29 

Brewers'  licenses 15,446.69 

Bottlers'  licenses 9,140.25 

Retailers'  licenses 405,105.00 

Billiard  licenses 29,845.98 

Brokers'  licenses 20,893.38 

Auctioneers'  licenses 9,004.67 

Peddlers'  licenses 3,064. 76 

Theatre,  circus,  etc.,  licenses 14,025.37 

Pamphlet  laws 402. 60 

Bonus  on  charters 148,624.56 

Accrued   interest   987.33 

Notaries'  commissions i5,575-00 

Alleghany    Valley    R.R 212,500.00 

United  States  Government  ^interest  on  bonds) 172,000.00 

Commutation  of  tonnage  tax  (Pennsylvania  R.R.) 460,000.00 

Right  of  way  (J^.  Y.,  L.  E.  &  W.  R.R.) 10,000.00 

Escheats 1,957.16 

Fees  of  public  officers 61,952.17 

Refunded  cash   8,384.67 

Conscience  money 82.25 

Miscellaneous 16,931.13 

$7,646,147.37 

The  State  debt  (net)  November  30,  1886,  was $7,078,235 

Cash  balance  in  the  treasury 2,101,457 

The  auditor-general   estimates  that  taxes  on  real  estate  for  local  pur- 
poses amount  to  $30,395,350. 


THE   PENN.SYLVANIA   TAX   COMMISSION    BILL. 

A  Revenue  Act  making  material  changes  in  the  tax  system  of  the  State, 
more  especially  in  reference  to  the  taxation  of  corporations,  was  passed  by 
the  Legislature  in  1S87,  but  failed  to  become  a  law  through  the  accidental 
omission  of  the  .  signature  of  the  President  pro  tempore  of  the  Senate. 
Prior  to  the  passage  of  said  act,  by  a  concurrent  resolution  approved  Feb- 
ruary 18,  1887,   a  commission   to  consist  of   five  members  of  the  Senate, 


212  APPENDIX. 

seven  members  of  the  House,  the  auditor-general,  the  State  treasurer,  the 
President  of  the  Senate,  Speaker  of  the  House,  and  three  leading  citizens 
to  be  selected  by  the  governor,  was  authorized  to  revise  the  revenue  laws 
of  the  Commonwealth  and  report  by  bill  or  otherwise  at  the  next  session  of 
the  Legislature.  Upon  the  failure  of  the  bill,  which  had  anticipated  their 
labors,  the  commission  proceeded  to  prepare  a  bill,  embodying  the  various 
laws  in  existence,  and  imposing  upon  corporations,  with  some  exceptions, 
one  uniform  tax  in  place  of  the  three  taxes  on  capital  stock,  gross  receipts 
and  loans  and  bonded  indebtedness,  which  tax,  as  was  estimated,  would  pro- 
duce nearly  the  same  revenue  as  was  derived  from  the  three  taxes  named. 
This  bill  will  be  presented  at  the  next  session  of  the  Legislature,  but  it  is 
extremely  improbable  that  it  will  be  adopted  in  its  present  form,  a  consider- 
able reaction  of  public  opinion  having  been  developed  in  the  State  against 
it.  The  sections  of  the  bill  which  introduce  new  matter,  or  essentially 
change  the  existing  law,  are  as  below  : 

Section  i8  provides  it  shall  be  unlawful  for  any  person  or  persons,  co- 
partnership, unincorporated  association,  limited  partnership,  bank,  or  cor- 
poration whatsoever,  in  loaning  money  at  interest  to  any  person  or  persons, 
whether  such  loans  be  secured  by  bond  and  mortgage  or  otherwise,  to  re- 
quire the  person  or  persons  borrowing  the  same  to  pay  the  tax  imposed 
thereon,  and  in  all  cases  where  such  tax  shall  have  been  paid  by  the  bor- 
rower or  borrowers  the  same  shall  be  deemed  and  considered  usury  and  be 
subject  to  the  laws  governing  the  same. 

Section  ig  provides  that  the  treasurer  of  every  city,  county  and  borough 
of  the  State,  and  of  every  limited  partnership  and  corporation  organized,  or 
incorporated,  under  the  laws  of  this  State,  or  of  any  other  State,  or  of  the 
United  States,  and  doing  business  within  this  State  (except  those  taxable 
under  the  26th  section  of  this  act),  paying  interest  upon  any  loan  or  loans, 
which  are  made  taxable  by  law,  whether  secured  by  script,  bonds,  certifi- 
cates, or  otherwise,  shall  report  to  the  auditor-general  annually  the  amount 
of  such  loans  and  the  name  and  residence  of  each  owner  or  holder  thereof, 
within  this  State,  and  the  amount  held  by  each,  as  nearly  as  can  be  ascer- 
tained. It  shall  then  be  the  duty  of  the  auditor-general  to  assess  the  same 
for  taxation  at  the  rate  of  three  mills  on  the  dollar  of  'Jie  par  value  thereof, 
and  the  officers  of  said  cities,  corporations,  etc.,  shall  thereupon  pay  said 
tax  and  deduct  it  from  the  interest  due,  or  to  become  due,  to  the  holders  of 
said  loans. 

Section  25  provides  that  every  pipe-line  company,  conduit  company, 
steamboat  company,  or  other  company,  association,  or  partnership,  doing 
business  in  this  State  by  ownership,  operation,  or  lease,  to,  or  from,  others, 
in   the  way  of   transporting  freight,  passengers,  oil  or  gas  (except  those 


APPENDIX.  2 1 


:> 


enumerated  in  the  26th  section  of  this  act),  and  every  telegraph  or  telephone 
company,  express  company  natural-gas  company,  electric-light  company, 
palace-car  and  sleeping-car  company,  shall  pay  a  tax  of  eight  mills  upon  the 
gross  receipts  from  business  done  wholly  within  this  State. 

Section  26  provides  that  in  lieu  of  the  taxes  imposed  in  the  preceding 
sections,  every  railroad  company,  canal  company,  slack-water  navigation 
company,  and  street  passenger  railway  company,  shall  pay  a  tax  of  three 
mills  on  the  dollar  of  the  actual  value  of  their  jiropcrty,  assets  and  fran- 
chises, which  shall  be  determined  by  adding  the  whole  amount  of  their 
funded  debt  at  par  to  their  entire  capital  stock  at  its  actual  value.  In 
cases  where  the  lines  of  such  companies  are  partly  within  and  partly  with- 
out the  State,  the  assessment  for  taxation  shall  be  in  proportion  to  the  mile- 
age within  the  State.  The  stock  and  bonds  of  companies  paying  tax  under 
this  section  are  exempt  from  taxation  in  the  hands  of  the  holders. 


^ 


:/' 


rf  '    ^ 


UNIVERSITY  OF  CALIFORNIA  AT  LOS  ANGELES 
■^'-'p   UNIVPIP- 


U>{IVERS1TY  OF  CALIFORNIA 

AT 

LOS  ANGELES 

T.TRRAPV 


-1^^5 Cq.s.sr   » 


C82sE      Taxation. 


£L 


u^ 


HJ 
175 
C82sE 
1896 


3  1158  01045  2349 


Lie  SOlJTMrR':  R?  niONAL  LIBRARY  FACILITY 


AA    000  545  693    4 


